Is The Fed Giving Wall Street A Free Ride?

Booms and busts are inevitable in a capitalist system. Right now, the Federal Reserve and, belatedly, the U.S. Treasury, are out to avoid facing the terrifying prospect that the credit crunch currently bedeviling Wall Street could morph into a sharp and sickening economic downturn--or even a full-fledged depression.

Think about what the Fed has done in recent months: cut its benchmark interest rate by 3 percentage points (including a 75-basis-point easing on Mar. 18), injected massive amounts of liquidity into the financial system, set up an alphabet soup of funding mechanisms for big U.S. banks (a Term Auction Facility, or TAF; a Term Security Lending Facility, or TSLF; and a Primary Dealer Credit Facility, or PDCF), and wielded extraordinary powers to engineer the rescue of investment bank Bear Stearns (BSC).

The Fed's unusual burst of activity has a clear, specific purpose. In the jargon of Wall Street rocket scientists, the Fed wants to avoid a "fat tail" catastrophe event or "regime shift." In simpler, terms, it's trying to stop a financial-system meltdown. The Fed's urgent efforts to shore up the financial system are understandable, when depression fears have shifted from society's "crackpot fringe" to the power centers of Washington and New York. For Ben Bernanke & Co., there was no real alternative.

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Comments

[gakabani]

Yes, this is a fascist state. This is what the gov should do, ala "Hitler style."
History repeats itself.

[research]

Ain't unfettered capitalism Great?

[javaman]

Yeah, free ride straight into a brick wall.

in the very near future, all this bogus bailout fiat money will come to haunt these idiots.

I think the term, "time to pay the piper" comes to mind.

[CharlesMac]

There is no free ride.

All bills come due.

[ErnestineBass]

36 Comments.

20 Pending.

[ErnestineBass]

41 Comments.

19 Pending.

This article posted at 2 PM yesterday!

WTF? If this trend continues, you're going to put Huffington Post out of business. Check your hit numbers. My guess is they are WAY DOWN. WHAT'S GOING ON???

[Veganie]

If the cold blooded religous morons running this country really cared about the taxpayers, the would take that $160 billion and give every citizen over 21 with an income under $50,000 about $100,000. There would be plenty left over and the economy would really start booming.

[Ramirez]

Or we could just give every citizen 500 bucks.

[FrankFurter]

Privatising profits and socializing losses.
It's brilliant really. You have to hand it to them high powered banker types.

This was no mistake.

Look who has the money now.
The same rich assholes who had the money before.
"Our" government just gave it to them.

Look who will be paying the debt.
The same peasants who always foot the bill for such criminality.
"Our "government just gave it to us.

Pretty simple really.

Why can we bail out the rich assholes who's greed and complicity created this mess and we peasnants can't get any support for education or healthcare?

Why are we still subsidising oil companies?
Why have nearly 4000 of our soldiers died in Iraq?
Why is it that Dick Cheney doesn't care about what the American people think?
http://www.crooksandliars.com/2008/03/19/why-does-dick-cheney-hate-the-american-people/

This was no mistake, this, like so many other well executed plans disguised as poor judgement or lack of planning was simply another very well executed plan.

This plan, like the others, is a plan which we peasants will be paying off for the rest of our life.

[rex1933]

Your comments are perfect. Corporations have the same rights of individuals. Except we as individuals must be thankful to banks that they allow us credit at 28% interest rate (Bank of America). JP Morgan gets a free ride. Cheney says "SO!"

[Robert59]

No, the U.S. taxpayer, through the Fed, is. The Fed acts like the treasury notes it possesses are actually its property. Those notes belong to the American people. Judging from the near 250 point drop today bailing out Bear Stearns did nothing to inspire lasting confidence.

Merrill Lynch is now suing one of its insurers. Why would they do that unless they are trying to get out of debt they've incurred, a loan they can no longer pay bacause the people or organizations they've loaned money to aren't making their payments. The house of ML is about to fall. And everyone thought it would be Lehman Brothers next.

The real question is why didn't the insurance company pay up? Are they in the same boat or are they refusing because they suspect ML committed fraud relating to the value of said CDOs, inflated their worth?

We taxpayers are going to get 160 billion back between May and August; it's really not a gift becaue there is no surplus. It just adds to the national debt and will have to be repaid by taxpayers at a later date. Meanwhile our eye has been taken off the ball because the Fed has loaned out 400 to 500 billion dollars to Wall Street. The collateral those companies are putting up, worthless CDOs.

The American taxpayer, through the Fed, is Wall Street's ultimate Golden Parachute.

In the blink of an eye, the Fed and Congress have added between 550 and 650 billion to the national debt. And they may not be through giving out money to Wall Street.

[mmckinl]

Fire the Federal Reserve and establish a Public Central Bank ...

Why should we pay interest on our own money ? Why should we bail out the very people who caused this mess.

A Public Central Bank would create our money atno charge to us , unlike the Fed that only takes debt that we pay interest on. The Fed has proven time after time , from the panic of 1921 to the Great Depression to all of Greenspans' Bubbles that it puts its' members interests over its' fiduciary duty to the public.

[handyallen1]

"there was no real alternative " really now how about let them fail i dont see anyone catching me when i cant pay my bills

[NicoleAnonymous]

Everyone know Bernake and Paulson, who both worked at Conman Sachs, are only doing what bankers tell them to. If bankers told them to put on a rabbit suit and jump up and down, both Bernake and Paulson would do it. This is nothing new.

But I'm amazed that people in this country think we still need the Fed anymore. All they do is have meetings where people ananlyze every word they say and they do what they always do - lower the rates again. Of course we need the Fed to bail out banks occasionally and use their money to guarantee loans so JP Morgan, didn't the original JP Morgan create the original Fed with other bankers in a secret meeting, can make more money but what else do we need them for?

Just give me the job and I will lower the rates when bankers ask me to and I won't even have meetings where I pretend that I know anything about economics.

[Shaddup]

YES.

[themodernleader]

Only a blind fool can not recognize that the Bernacke Fed is bailing out the same robber barons who perpetuated the greatest swindle in the history of the human race. This bail-out of hundreds of billions of printed, unbacked bills comes with the wiping out of the American currency and the belated destruction of the Ameerican economic system. Without a trustworthy currency no economy has any credibility.
I am amazed that conservatives and Democrats do not both scream to high heaven at the raw cynicism with which the Fed is acting on behalf of a few miscreants at the expense of the safety, security and future prospects of the American people. For our timidity and anti-patriotism, we deserve what we will receive. Self governance is earned, not automatically given.

[Nutcase]

It's not just a free ride. They are getting paid to ride the backs of the American public.

Je pense, donc je suis populiste.

[NicoleAnonymous]

I can't stand it when people use french in the middle of a discussion just to prove how smart they are.

[Nutcase]

I can't stand it when . . .

I use it as my tag line in all of my political posts. It is to remind people that I don't support any of the remaining candidates. By the way, it is a takeoff on a Frenchman's quote in Latin. Also, speaking French doesn't mean that one is smart. There are quite a few Frenchmen who are lacking in that department. My Latin is just short of rudimentary. I am very rusty in German. It has been 27 years since I had the opportunity to practice my Chinese but I can still carry on a limited conversation in Korean. I don't need to prove to a bunch of strangers that I am smart. My colleagues accept me as a peer. That suffices.

Je pense, donc je suis populiste.

[PacificGatePost]

MR. FARRELL,

Well done, however while asking for regulation, there is much that is overlooked, and near term repair could and should be implemented ASAP. Let’s fix the BOARDROOM.

You suggest a demand for more transparency and scrutiny. Such laudable expectations should begin near the top of the economic food chain….

"WE THE SHAREHOLDERS OF YOUR COMPANIES.­..... >>

http://pacificgatepost.blogspot.com/2008/03/letter-to-ceos-of-fortune-1000-cos.html


While oversight currently means carelessness bordering on abuse, it should mean DUE DILIGENCE.