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The Fed has also agreed to buy the worthless bonds from banks, should they need cash, albeit they expect repayment @ 4-point-something %, which I understand ban
by laweijfmvo 4y ago
The Fed has also agreed to buy the worthless bonds from banks, should they need cash, albeit they expect repayment @ 4-point-something %, which I understand banks immediately took advantage of. I guess we'll just deal with that problem later, as usual.
- loeg 4y agoThe bonds aren't worthless. The important distinction of the new short-term Fed lending program is that the Fed loans against the face value of the bonds, rather than the market value.
- laweijfmvo 4y agoThank you for clarifying
- khuey 4y agoAFAIK, the Fed has agreed to lend banks cash on a short-term basis against their devalued (hardly worthless) bonds at par. If you have a source for the Fed agreeing to buy bonds I'd be very interested to read it, because AFAIK the Fed is selling close to $100B of bonds a month.
- JumpCrisscross 4y ago> Fed has also agreed to buy the worthless bonds from banks Not worthless, worth less. The Fed has always let banks borrow against Treasuries at the discount window. The discount is to their fair market value. They created a new mechanism, the BTFP, which lets banks borrow against the face value of their Treasuries at a higher rate [1]. [1] https://www.federalreserve.gov/newsevents/pressreleases/monetary20230312a.htm https://www.federalreserve.gov/newsevents/pressreleases/mone...