DUDE. WHY WOULD BANKS EXCHANGE $X IN ASSETS FOR $X IN CASH FROM THE FED. THAT WOULD BE POINTLESS. IT WOULD NOT CHANGE THEIR BALANCE SHEET MATERIALLY?
The reason they did it - is because they were exchanging $X in assets for NX$ in cash.
If they weren't getting 'better than market prices' - the transactions would not have occurred. The 'big red' area on the Fed's balance sheet would have no financial reason to exist.
It's very existence implies the banks were getting a 'better than market deal'.
Forbes - not exactly a conspiracy outfit - refers to it as "MONEY LAUNDERING" and makes a direct comparison to organized crime.
From the article:
"After the Fed buys (at face value) and resells (at pennies on the dollar) the bad mortgage-backed securities with newly minted electronic digits that it places into the banks’ Federal Reserve accounts, it then sterilizes the entire operation to prevent the new money from transmitting the dread inflation virus. The Fed does so by, in effect, quarantining inside the banking system the new toxic money used to launder the dirty loans."
There have been $9 TRILLION dollars in off balance sheet* transactions that the Fed refuses to disclose. (!!!!).
You say: "Open Market Operations by definition are done at market prices"
Prove it! Where is your evidence these transactions are done at 'Market Value'??
-----> The burden of proof is on you <------
You can't prove it because those records are not available.
Ask yourself: WHY are those records not available? Because in every other country they are.
"The Fed refuses to provide any information on how it priced individual securities bought with TALF funds."
The Fed's primary objective is to keep the banks healthy.
'Would I rather see banks fail'
'Banks look to the Fed for leadership'.
It's all irrelevant. The banks shareholders should have been wiped out. Then we can see some degree of financial packages and stimulus with full transparency and accountability.
Dude - you are defending an opaque institution - that has issued 2.5 Trillion dollars - without Congressional approval or oversight - and without providing financial records!
> DUDE. WHY WOULD BANKS EXCHANGE $X IN ASSETS FOR $X IN CASH FROM THE FED. THAT WOULD BE POINTLESS. IT WOULD NOT CHANGE THEIR BALANCE SHEET MATERIALLY?
Actually, that's precisely what the Fed normally does. Banks need to maintain cash on their balance sheet to meet reserve ratios; being able to trade their assets in for cash at market price allows them to do precisely that.
Or to put it another way, OMO shouldn't not magically increase a bank's assets (which is what would happen if you took a $1 bond and gave it $2 in cash), but it should increase the amount of cash. It is not 'pointless' -- trading cash for assets, at the market price, is precisely how monetary policy works.
"The Desk initiates this process by announcing the OMO through an electronic auction system called FedTrade, inviting dealers to submit bids or offers as appropriate ... The dealers' propositions are evaluated on a competitive best-price basis"
It's by definition a market price because the transactions are done via open auction to anyone on the Street.
Btw, your source is an op-ed contributor whose main thesis is that the Fed is up to no good, and also doesn't provide any references. He basically assumes that all the assets the Fed purchased are bad assets, without any proof. I took a look at those charts you shared and looked back and the Fed balance sheet. The vast majority of assets are T-bills, T-bonds, MBSes, e.g. NOT crap assets.
> -----> The burden of proof is on you <------
I don't really agree. We have two differing points of view -- why do you automatically get presumed to be correct? This is a forum discussion, not a trial. But if it were, I think the burden of proof falls onto the person alleging wrongdoing, like you're doing here.
> You can't win this one.
What makes you think this is about winning? I like to share why I hold my opinion and also see where other people are coming from, but frankly, you seem to be turning this into a personal pissing contest.
It's pretty obvious you made up your mind, and no amount of reasoning or evidence from me is going to sway you. Given that that we can't even agree on very basic facts, like how the Fed goes about its normal daily business, or its governance structure, which are all pretty easily verifiable on Wikipedia or mainstream news sources, I'm not sure what value there is to continuing to discuss this other than getting us both worked up into a lather.
The reason they did it - is because they were exchanging $X in assets for NX$ in cash.
If they weren't getting 'better than market prices' - the transactions would not have occurred. The 'big red' area on the Fed's balance sheet would have no financial reason to exist.
It's very existence implies the banks were getting a 'better than market deal'.
Here is Forbes on exactly this transaction:
http://www.forbes.com/sites/lawrencehunter/2012/10/29/are-fe...
Forbes - not exactly a conspiracy outfit - refers to it as "MONEY LAUNDERING" and makes a direct comparison to organized crime.
From the article:
"After the Fed buys (at face value) and resells (at pennies on the dollar) the bad mortgage-backed securities with newly minted electronic digits that it places into the banks’ Federal Reserve accounts, it then sterilizes the entire operation to prevent the new money from transmitting the dread inflation virus. The Fed does so by, in effect, quarantining inside the banking system the new toxic money used to launder the dirty loans."
There have been $9 TRILLION dollars in off balance sheet* transactions that the Fed refuses to disclose. (!!!!).
You say: "Open Market Operations by definition are done at market prices"
Prove it! Where is your evidence these transactions are done at 'Market Value'??
-----> The burden of proof is on you <------
You can't prove it because those records are not available.
Ask yourself: WHY are those records not available? Because in every other country they are.
Have a read:
https://en.wikipedia.org/wiki/Term_Asset-Backed_Securities_L...
"The Fed refuses to provide any information on how it priced individual securities bought with TALF funds."
The Fed's primary objective is to keep the banks healthy.
'Would I rather see banks fail'
'Banks look to the Fed for leadership'.
It's all irrelevant. The banks shareholders should have been wiped out. Then we can see some degree of financial packages and stimulus with full transparency and accountability.
Dude - you are defending an opaque institution - that has issued 2.5 Trillion dollars - without Congressional approval or oversight - and without providing financial records!
You can't win this one.