4 ms·
It's a overnight loan, backed by US Treasuries of some type (ie Bond's guaranteed by US Government). Bank gives Bond, Fed gives $$, swap back a few hours later.
by mox1 7y ago
It's a overnight loan, backed by US Treasuries of some type (ie Bond's guaranteed by US Government). Bank gives Bond, Fed gives $$, swap back a few hours later.
The closest analogy would be a homeowner offering their house as collateral for a ~12 hour loan....
- ianai 7y agoMy point holds. The details underlie that it’s an even weaker effort. I said “by dropping 1.5T into the market the fed hoped the financial system would increase circulation enough to stimulate transactions (...) instead companies bought back stock or otherwise didn’t stimulate trade.” The details only serve your point in so far as they muddy the waters. My point holds. The fundamental problem is that people must socially distance to flatten the curve. That’s having all sorts of ripple effects as people are being laid off due to the crashing of demand for their services. So now whole swaths of people are facing hardships leading to missing home and rent payments. For instance MGM: https://www.fox5vegas.com/coronavirus/mgm-resorts-announces-layoffs-closures-several-employees-with-coronavirus/article_3c2b555c-6568-11ea-96cc-43d1f76ae752.amp.html https://www.fox5vegas.com/coronavirus/mgm-resorts-announces-...
- fragmede 7y agoPayday loans are another analogy, with some added price gouging on top because f*ck the poor. Here's my previous pay check (s), so the payday loan place knows how much money I make; here's some sort of proof that I haven't been fired yet, so they believe that my next pay check is coming within a few hours/days; and heres's some legal-equivalent of the title to my car, for them to repo in case I'm not able to pay back the loan. A 12-hour loan of $12k might seem ridiculous but an entire industry has been built on top of $300 loans for 72-hours, at great profit (until regulations came in to cap the profit).
- ianai 7y agoThey’re not really apples for apples comparisons as people don’t have the same abilities to make money in 12 hours that businesses do. Overnight loans serve a purpose to businesses that people or households don’t have a direct analog to use. I’d recon it’s more useful to offer a household or person a 1-3 month loan or credit line to help cover any lost wages due to sickness or fallout from the covid response.