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The joint statement has made it clear they are not paying for this through FED/Treasury muckery. It will be paid for by a "special assessment" of the FDIC on ba
by DubiousPusher 4y ago
The joint statement has made it clear they are not paying for this through FED/Treasury muckery. It will be paid for by a "special assessment" of the FDIC on banks "which is required by law".
- acchow 4y agoAnd what of this BTFP facility? The fed is willing to lend out full par value against high quality assets. Because AAA high quality assets never default and always return full par value, right? How is this not kicking the can down the road? This is like a new almost-QE product. For now, it’s just a collateralized loan. But if there is some system shock and a lot of these high quality bonds start defaulting, you bet your ass the fed will buy up these distressed assets and then we’ll have QE again. I do hope we don’t have such a shock. But they’re like a once in a lifetime event, and we already got one in 2008, so we’re probably fine.
- DubiousPusher 4y agoI didn't dive into this part. Looks like this is their real game for preventing spill-over. My understanding is that the government actually made a lot of money off the toxic assets it bought post 2008. Maybe they can pull off the same trick? I was sceptical that this was indeed systemic before but I'm reassessing that opinion.