November 25, 2008

As Lenders (And Consumers) Hoard, The Fed Commits Another $800B

As lenders and consumers continue to hoard, the Fed announces a $800B spending spree:

The central bank will purchase as much as $600 billion in debt issued or backed by government-chartered housing-finance companies. It will also set up a $200 billion program to support consumer and small-business loans, the Fed said in statements today in Washington.

Yet across the pond Libor continues to rise:

Libor’s declines are stalling on concern the U.S. government’s attempts to contain the financial crisis won’t be sufficient to revive bank lending.

And not included in that $800B is the $230B of taxpayer funds the Fed has put at risk with the bailout of Citigroup this week.

Fed Commits $800 Billion More to Unfreeze Lending [Bloomberg]
Libor Drop Stalls as Bailout Concern Fuels Bank-Cash Hoarding [Bloomberg]
Citigroup gets a monetary lifeline from feds [SFGate]

First Published: November 25, 2008 7:30 AM

Comments from "Plugged In" Readers

Sky falling again? BORROW MORE SKY!!!

Somebody, someday, will pay it back eventually. Right?

I'm curious what happens when Citi needs ANOTHER bailout in a few months? Or when FNM and FRE are insolvent again? Oh, and in case anyone hasn't been paying attention, they're still making loans designed to default through FHA. Get you some of that American dream as long as you have a whopping 3% down. But it's OK, because Sheila Bair at the FDIC is forcing everyone into workout. You know - help folks stay in their homes (please disregard the fact that restructured mortgages have a re-default rate around 50%).

And then there are the credit card portfolios, auto loans, and let's not forget corporate debt....

Posted by: Dude at November 25, 2008 10:11 AM

That's it!! I'm buying 10 kg (yes, kilograms) of gold bullion on my credit cards, defaulting and moving my company to Switzerland.

The banks and the Fed can go screw themselves!!

Posted by: Jimmy (Bitter Renter) at November 25, 2008 10:16 AM

Are you really? That is something like $1/4M, which is a pretty high limit on a credit card.

That would be about a 3 inch cube of gold.

Posted by: NoeValleyJim at November 25, 2008 11:55 PM

Get a bucket of nice BUTTER filled popcorn and watch this thing play out. We will truly need innovation before this is over...

Posted by: Michael L. at November 26, 2008 11:42 AM

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