Last Friday the Fed announced a $200 billion dollar program for buying toxic assets from banks to help them stay afloat. Yesterday the New York Federal Reserve Bank started a new $500 billion dollar program for buying toxic securities from Freddie Mac (NYSE: FRE) and Fannie Mae (NYSE: FNM)
Since Friday the yield on 30 year agency mortgage securities dropped from 208 basis points over Treasuries down to 190 basis points. This has had the effect of lowering mortgage rates. The rate on a 30 year fixed mortgage has dropped to 5.3% from 6% last November.
The Fed is using four firms to conduct these transactions. They are: BlackRock (NYSE: BLK), Goldman Sachs (NYSE: GS), Pimco and Wellington Management.
As was stated previously, the Fed has not disclosed the details of any of these repurchase programs. They are saying that they will be doing this "as the need arises."
A dramatic effect of this new Fed action is the sharp drop in US Treasuries, which today are down another 217 basis points on the 30 year March futures contract. Since last Wednesday the March 30 year bond futures contract has dropped from 141 down to 133 for a drop of about 800 basis points or $8,000.
I guess we can assume from all of this that Freddie Mac, Fannie Mae and the banks are in much deeper trouble than the Fed led us to believe last November. The Fed is not calling these bailouts any longer. They are just going ahead with these massive programs, programs that, by and large, investors and the public are not aware of.
What are your thoughts on these programs?
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Reader Comments (Page 1 of 1)
1-07-2009 @ 9:15AM
BHarrison said...
The basic investigative principle is to: "FOLLOW THE MONEY . . ."
and see where it leads, right?
Congress has tacitly failed to provide or reqire the FIs and
corporations who have received "bailout monies" to provide FULL
DISCLOSURE and TRANSPARENCY in regard to the use of these monies . .
. AND actually, under the existing market conditions ALL corporations
listed on the stock markets whould be required to provide FULL
DISCLOSURE and TRANSPARENCY of their financial reports.
Without this, there can be no faith and confidence or INTEGRITY in
the markets or the corporations.
Likewise, with the Madoff Ponzi scandal, suddenly there is a "veil of
confidentiality" cast over these matters by our government agencies.
Any such "secrecy" and/or confidentiality can ONLY be perceived as
being nefarious attempts to protect other guilty individuals and
interests involved in this fraud.
This type of decit by our government regulatory agencies cannot be
tolerated; and any regulator who attempts such actions should be
summarialy charged with either misfeasance or malfeasance . . . and
should be fired and indicted. We, the people, will not tolerate such
abuses of our right to know.
Our government . . . Congress and the regualtory agencies . . . have,
for too long been the stooges for the special interests groups. The
INTEGRITY of the markets and corporations requires FULL DISCLOSURES
and TRANSPARENCY, subject to professional and publc scrutiny to
ferret out the frauds and unsound business practices that have caused
the collapse of our economic system.