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Hm, you simply ignored my points or straight contradicted them without any sources. > + "I call BS. Low rates are almost always punitive to banks' bottom lines

Hm, you simply ignored my points or straight contradicted them without any sources. > + "I call BS. Low rates are almost always punitive to banks' bottom lines" this is completely false. Follow the link my friend -- net interest margins are sharply lower when rates are low. If you are going to just flatly disagree, you're entitled to your opinion, but I really don't think you will find accurate data to justify your viewpoint. > This is utterly, beyond naive. The Fed Chair is an extremely politically driven position - they don't get to this position and do whatever suits them or the economy. You're trying to have your cake and eat it too. Please make up your mind: either the bankers own the Fed, or politicians do. Also, if you think that the bankers own all the politicians, then nationalizing the Fed wouldn't help anyway, would it? Also, this bears repeating: THE PRIVATE SHAREHOLDERS OF THE FED DO NOT CONTROL THE FED, BECAUSE THEY ONLY CONTROL A MINORITY OF THE BOARD SEATS. > My friend - if you believe for a second that the Fed is acting entirely in the public's interest - then the public should be able to see what's on the Fed's books. This is a classic conspiracy theorist argument. They don't want to show us all their books, so they must be doing something bad and hiding it. You don't have any evidence of any wrongdoing, you just presume that it exists because of your prior beliefs. In reality, people don't like politically motivated critics to rummage through their books. Climate scientists don't want their critics access to their e-mails -- does that prove that those scientists were faking climate change? I wouldn't mind the Fed opening up all its books, but I also don't support a witch hunt. > the system is designed first and formost for the benefit of the banks Begging the question. Please show me a credible, historical source that supports your claim. It'd also help if you can explain the long history of Fed actions that would've been against the interests of its private shareholders that you claim completely control it. Let's start with the Crash of '29 and the Fed's efforts to prevent it, for starters. > or at least a 2.5 Trillion dollar 'gift' to private banks by the central bank is only to the 'benefit' of the people of the US to the extent that the entire banking system doesn't come down and crash - but in a real capitalist system - most of those banks should have had 100% of their shareholder value wiped out. I agree there are issues regarding moral hazard and who should be paying for the mess the bankers got us all in. But do you really think that the optimal solution is for the US to nationalize every insolvent bank, and that they could've done it without causing market panic and worsening the crisis in the process? Anyway, the Fed could be explicitly nationalized without any real-world effect, precisely because it has been the textbook example of how to run a central bank for the last 60 years. You seem to think that all other countries' run their central banks better, but the truth is that those banks look to the Fed for leadership and guidance. > So - the Fed - allowed banks to put those mortgages on the banks balance sheet at _face value_ - for a period of time. Ex: ABC banks has a a crap mortgages on a house with a market value of $100K, but the mortgage is for $200K (it's worthless) - they exchange them with the Fed for a full $200K. Really doubt that--credible source please? Open Market Operations by definition are done at market prices; the Fed does not buy assets for twice their market value. I agree it would be pretty criminal if they did, but it would also be blindingly easy to find the evidence: just look at the free money flowing into each bank's balance sheets and cashflow statements. If you think the Fed did this, and then everyone conspired to hide the evidence, then we are certainly far into conspiracy theorist territory.

jomamaxx 10y ago
DUDE. WHY WOULD BANKS EXCHANGE $X IN ASSETS FOR $X IN CASH FROM THE FED. THAT WOULD BE POINTLESS. IT WOULD NOT CHANGE THEIR BALANCE SHEET MATERIALLY? The reason they did it - is because they were exchanging $X in assets for NX$ in cash. If they weren't getting 'better than market prices' - the transactions would not have occurred. The 'big red' area on the Fed's balance sheet would have no financial reason to exist. It's very existence implies the banks were getting a 'better than market deal'. Here is Forbes on exactly this transaction: http://www.forbes.com/sites/lawrencehunter/2012/10/29/are-federal-reserve-regulated-banks-laundering-dirty-money/#6d83334627cb http://www.forbes.com/sites/lawrencehunter/2012/10/29/are-fe... Forbes - not exactly a conspiracy outfit - refers to it as "MONEY LAUNDERING" and makes a direct comparison to organized crime. From the article: "After the Fed buys (at face value) and resells (at pennies on the dollar) the bad mortgage-backed securities with newly minted electronic digits that it places into the banks’ Federal Reserve accounts, it then sterilizes the entire operation to prevent the new money from transmitting the dread inflation virus. The Fed does so by, in effect, quarantining inside the banking system the new toxic money used to launder the dirty loans." There have been $9 TRILLION dollars in off balance sheet* transactions that the Fed refuses to disclose. (!!!!). You say: "Open Market Operations by definition are done at market prices" Prove it! Where is your evidence these transactions are done at 'Market Value'?? -----> The burden of proof is on you <------ You can't prove it because those records are not available. Ask yourself: WHY are those records not available? Because in every other country they are. Have a read: https://en.wikipedia.org/wiki/Term_Asset-Backed_Securities_Loan_Facility https://en.wikipedia.org/wiki/Term_Asset-Backed_Securities_L... "The Fed refuses to provide any information on how it priced individual securities bought with TALF funds." The Fed's primary objective is to keep the banks healthy. 'Would I rather see banks fail' 'Banks look to the Fed for leadership'. It's all irrelevant. The banks shareholders should have been wiped out. Then we can see some degree of financial packages and stimulus with full transparency and accountability. Dude - you are defending an opaque institution - that has issued 2.5 Trillion dollars - without Congressional approval or oversight - and without providing financial records! You can't win this one.
- smallnamespace 10y ago
  > DUDE. WHY WOULD BANKS EXCHANGE $X IN ASSETS FOR $X IN CASH FROM THE FED. THAT WOULD BE POINTLESS. IT WOULD NOT CHANGE THEIR BALANCE SHEET MATERIALLY? Actually, that's precisely what the Fed normally does. Banks need to maintain cash on their balance sheet to meet reserve ratios; being able to trade their assets in for cash at market price allows them to do precisely that. https://en.wikipedia.org/wiki/Open_market_operation https://en.wikipedia.org/wiki/Open_market_operation Or to put it another way, OMO shouldn't not magically increase a bank's assets (which is what would happen if you took a $1 bond and gave it $2 in cash), but it should increase the amount of cash. It is not 'pointless' -- trading cash for assets, at the market price, is precisely how monetary policy works. https://www.newyorkfed.org/aboutthefed/fedpoint/fed32.html https://www.newyorkfed.org/aboutthefed/fedpoint/fed32.html "The Desk initiates this process by announcing the OMO through an electronic auction system called FedTrade, inviting dealers to submit bids or offers as appropriate ... The dealers' propositions are evaluated on a competitive best-price basis" It's by definition a market price because the transactions are done via open auction to anyone on the Street. Btw, your source is an op-ed contributor whose main thesis is that the Fed is up to no good, and also doesn't provide any references. He basically assumes that all the assets the Fed purchased are bad assets, without any proof. I took a look at those charts you shared and looked back and the Fed balance sheet. The vast majority of assets are T-bills, T-bonds, MBSes, e.g. NOT crap assets. > -----> The burden of proof is on you <------ I don't really agree. We have two differing points of view -- why do you automatically get presumed to be correct? This is a forum discussion, not a trial. But if it were, I think the burden of proof falls onto the person alleging wrongdoing, like you're doing here. > You can't win this one. What makes you think this is about winning? I like to share why I hold my opinion and also see where other people are coming from, but frankly, you seem to be turning this into a personal pissing contest. It's pretty obvious you made up your mind, and no amount of reasoning or evidence from me is going to sway you. Given that that we can't even agree on very basic facts, like how the Fed goes about its normal daily business, or its governance structure, which are all pretty easily verifiable on Wikipedia or mainstream news sources, I'm not sure what value there is to continuing to discuss this other than getting us both worked up into a lather. Anyway, thanks for sharing :)

jomamaxx 10y ago

DUDE. WHY WOULD BANKS EXCHANGE $X IN ASSETS FOR $X IN CASH FROM THE FED. THAT WOULD BE POINTLESS. IT WOULD NOT CHANGE THEIR BALANCE SHEET MATERIALLY? The reason they did it - is because they were exchanging $X in assets for NX$ in cash. If they weren't getting 'better than market prices' - the transactions would not have occurred. The 'big red' area on the Fed's balance sheet would have no financial reason to exist. It's very existence implies the banks were getting a 'better than market deal'. Here is Forbes on exactly this transaction: http://www.forbes.com/sites/lawrencehunter/2012/10/29/are-federal-reserve-regulated-banks-laundering-dirty-money/#6d83334627cb http://www.forbes.com/sites/lawrencehunter/2012/10/29/are-fe... Forbes - not exactly a conspiracy outfit - refers to it as "MONEY LAUNDERING" and makes a direct comparison to organized crime. From the article: "After the Fed buys (at face value) and resells (at pennies on the dollar) the bad mortgage-backed securities with newly minted electronic digits that it places into the banks’ Federal Reserve accounts, it then sterilizes the entire operation to prevent the new money from transmitting the dread inflation virus. The Fed does so by, in effect, quarantining inside the banking system the new toxic money used to launder the dirty loans." There have been $9 TRILLION dollars in off balance sheet* transactions that the Fed refuses to disclose. (!!!!). You say: "Open Market Operations by definition are done at market prices" Prove it! Where is your evidence these transactions are done at 'Market Value'?? -----> The burden of proof is on you <------ You can't prove it because those records are not available. Ask yourself: WHY are those records not available? Because in every other country they are. Have a read: https://en.wikipedia.org/wiki/Term_Asset-Backed_Securities_Loan_Facility https://en.wikipedia.org/wiki/Term_Asset-Backed_Securities_L... "The Fed refuses to provide any information on how it priced individual securities bought with TALF funds." The Fed's primary objective is to keep the banks healthy. 'Would I rather see banks fail' 'Banks look to the Fed for leadership'. It's all irrelevant. The banks shareholders should have been wiped out. Then we can see some degree of financial packages and stimulus with full transparency and accountability. Dude - you are defending an opaque institution - that has issued 2.5 Trillion dollars - without Congressional approval or oversight - and without providing financial records! You can't win this one.

smallnamespace 10y ago
> DUDE. WHY WOULD BANKS EXCHANGE $X IN ASSETS FOR $X IN CASH FROM THE FED. THAT WOULD BE POINTLESS. IT WOULD NOT CHANGE THEIR BALANCE SHEET MATERIALLY? Actually, that's precisely what the Fed normally does. Banks need to maintain cash on their balance sheet to meet reserve ratios; being able to trade their assets in for cash at market price allows them to do precisely that. https://en.wikipedia.org/wiki/Open_market_operation https://en.wikipedia.org/wiki/Open_market_operation Or to put it another way, OMO shouldn't not magically increase a bank's assets (which is what would happen if you took a $1 bond and gave it $2 in cash), but it should increase the amount of cash. It is not 'pointless' -- trading cash for assets, at the market price, is precisely how monetary policy works. https://www.newyorkfed.org/aboutthefed/fedpoint/fed32.html https://www.newyorkfed.org/aboutthefed/fedpoint/fed32.html "The Desk initiates this process by announcing the OMO through an electronic auction system called FedTrade, inviting dealers to submit bids or offers as appropriate ... The dealers' propositions are evaluated on a competitive best-price basis" It's by definition a market price because the transactions are done via open auction to anyone on the Street. Btw, your source is an op-ed contributor whose main thesis is that the Fed is up to no good, and also doesn't provide any references. He basically assumes that all the assets the Fed purchased are bad assets, without any proof. I took a look at those charts you shared and looked back and the Fed balance sheet. The vast majority of assets are T-bills, T-bonds, MBSes, e.g. NOT crap assets. > -----> The burden of proof is on you <------ I don't really agree. We have two differing points of view -- why do you automatically get presumed to be correct? This is a forum discussion, not a trial. But if it were, I think the burden of proof falls onto the person alleging wrongdoing, like you're doing here. > You can't win this one. What makes you think this is about winning? I like to share why I hold my opinion and also see where other people are coming from, but frankly, you seem to be turning this into a personal pissing contest. It's pretty obvious you made up your mind, and no amount of reasoning or evidence from me is going to sway you. Given that that we can't even agree on very basic facts, like how the Fed goes about its normal daily business, or its governance structure, which are all pretty easily verifiable on Wikipedia or mainstream news sources, I'm not sure what value there is to continuing to discuss this other than getting us both worked up into a lather. Anyway, thanks for sharing :)