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Fed pumps another $38 bil to avert credit crunch

The markets' free fall may have ended this afternoon as the Federal Reserve Board pumped another $38 billion into the banking system to avoid the feared liquidity crisis, matching the amount they made available yesterday.

The Dow is now down about 80 points on the day, after being down over 200 earlier.

More detail from AP Economics reporter Jeannine Aversa.


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Comments (19)

Always take Aversa's writin... (Below threshold)

Always take Aversa's writing with a grain of salt. As usual, this piece, while containing facts, contains lots of loaded language like "meltdown", "careened", "turbulence". Her pieces are usually fine as long as you only read the first half before she starts waxing pessimistic.

Quite so, I should have inc... (Below threshold)

Quite so, I should have included a disclaimer on that.

It's also true of many or most financial reporters for fMSM outlets.

Go Buhh Economy!!!! Whohoo ... (Below threshold)
Carmelo:

Go Buhh Economy!!!! Whohoo best ever!

Carmelo:Go Buh... (Below threshold)
marc:

Carmelo:

Go Buhh Economy!!!! Whohoo best ever!

Well, actually it is or damn close to it.

But watching the stock market, a market that will "react" to any and everything up to and including the Pope catching a cold, this week gave you an excuse to post invalid and childish tripe didn't it?

Yesterday Bush was asked if... (Below threshold)
BarneyG2000:

Yesterday Bush was asked if he would help homeowners keep their their homes and he said no. Today Bush gave $38-million to banks and lenders to prop-up their profits even though they are the cause of the current crises.

Why didn't he just say: "let them eat cake"?

Barney, you really don't kn... (Below threshold)
SPQR:

Barney, you really don't know what you are talking about anything. The Federal Reserve added liquidity to the market by buying securities to keep the bank to bank interest rate at their target.

The Federal Reserve bank is not controlled the Bush administration directly so your comment is incoherent as usual.

Secondly, this current issues with subprime lending came because lenders, in part under pressure from Congress and others, have been loaning money to people who are not able to repay it. Blaming that on the Bush administration is equally incoherent.

The bottom line is that the... (Below threshold)
BarneyG2000:

The bottom line is that the Fed bailed out the banks that gave out a ship load of bad loans for reasons of pure profits, and a bunch of Americans are getting screwed.

Why is it good for the nation to bail out banks, but not help Americans?

The bottom line Barney is t... (Below threshold)
SPQR:

The bottom line Barney is that you don't know what you are talking about.

The Fed did not "bail out" any banks, they just bought securities to try to lower the market rate of interest. They provided a market for the securities to increase the liquidity available. That's not a "bailout" nor a gift as you have falsely asserted. Nor was it the act of the Bush administration.

Barney, no one actually makes you post these incoherent and ignorant comments, so why do you do it? One would think you would have learned long ago how silly you are making yourself look.

SPQR, so the lenders are no... (Below threshold)
BarneyG2000:

SPQR, so the lenders are not benefiting from this?

"It told banks that the Fed's discount window -- where banks can turn in an emergency for short-term loans -- is available as a source of funding."

Why not give people in need a low interest loan so they can keep their homes?

BarneyG2000 Stop!<... (Below threshold)

BarneyG2000

Stop!

This is senseless....let it go. You don't have a clue about the subject.

Barney, people in foreclosu... (Below threshold)
SPQR:

Barney, people in foreclosure are not there from a lack of low interest loans, but because they did not have the ability to make the payments on the loan they have.

None of which has anything to do with the Federal Reserve's actions. The Federal Reserve does not have the power to decide to gift people in foreclosure with money.

The bottom line remains Barney, that you do not have any clue how our financial system works and no ability to make a coherent comment about it.

SPQR, who gave those person... (Below threshold)
BarneyG2000:

SPQR, who gave those persons the loans? Were these persons good credit risks? No, they were not a good risk. That is why they call it below prime lending. The lenders took on too much risk and now the Fed is bailing them out.

Please go ahead and prove me wrong.

Barney, I've already proven... (Below threshold)
SPQR:

Barney, I've already proven you wrong three times on this thread alone. It gets boring after a while.

Ask yourself why you make a fool of yourself in public.

Yeah, Barney - people like ... (Below threshold)
padua:

Yeah, Barney - people like you butt in with your negativity, man. Blip - that's what we're seeing - blipsville. Ayone who knows how the financial system works knows there's no big deal. Slight adjustment needed - market will do that - then we notor along, and all the anti-patriotic childish tripe from people like you, it just demans you. President Bush's got it covered, man. Keep the faith.

Is this the same Barney tha... (Below threshold)

Is this the same Barney that flashed a new TNR story on dog killing Bradley's yesterday and then just disappeared when confronted with evidence that it was a week old story the TCY (Owens) thoroughly debunked?
If it is, I'm not going to spend a minute educating that Barney on credit market liquidity and Federal Open Market Committee (FOMC) policy.

"then we notor along, " No... (Below threshold)
BarneyG2000:

"then we notor along, " No we just don't "notar along. Why not let the lenders noter along?

The fundament question still remains. The goal is to stabilize the market. You can do that by bailing out the lenders or the homeowners. By bailing out the lenders, who have perpetuated the problem, you have screwed the homeowners that are the victims.

I am still waiting for anyone to dispute this.

Hugh, yep that Barney.... (Below threshold)
SPQR:

Hugh, yep that Barney.

Barney, the lenders were not bailed out. The Fed just eased a credit liquidity crisis at the bank to bank level by loaning out money short term. Very short term, the repurchase agreements that the Fed dealt in are literally 3 day agreements.

The subprime lenders were not bailed out. It is a shame that you continue to discuss matters far beyond your capabilities.

The Fed has no power to "bail out" homeowners.

Now it is getting very boring to continually correct your ignorant commentary. Do ask yourself why you insist on commenting on matters you have no understanding of.

You can do that by ba... (Below threshold)

You can do that by bailing out the lenders or the homeowners. By bailing out the lenders, who have perpetuated the problem, you have screwed the homeowners that are the victims.

Barney
There are two parties to a contract; amazingly, the courts in this country still recognize that point of law.
The parties are: the borrower and the lender
When these parties enter into a contract and a payment default occurs...amazingly (again)...the courts tend to rule against the party which has not fulfilled it's contractural obligation. This is settled law in this country....unless you choose to posit a predatory lending theory (good luck with that and thank you, you are welcome for the tip that won't work).

Wash, rinse and repeat. This is not rocket science.

Barney's ignorance is reall... (Below threshold)

Barney's ignorance is really quite remarkable. I've seen people with ignorance as deep on certain subjects, and I've seen those with a broad and generalized ignorance of many.

Never can I recall seeing one person exhibit both the depth and breadth of ignorance Barney does, though.

The whole "subprime mortgage" market was created in response to government whining (at all levels) that some people - those with poor credit - were being "discriminated against" in home mortgages. Wow, Sherlock, banks don't like to lend large sums to people who probably won't repay them? Who knew?

But the subprime market was designed to help, and it has. By charging a higher interest rate, and/or using other creative financing to reduce the lending institutions' exposure, the mortgage industry managed to extend the opportunity for mortgage financing to a whole new class of buyer.

Naturally, the influx of new buyers helped run real estate prices up. They call it "supply and demand." Lenders were encouraged, too, by the quick appreciation. It gave buyers more equity faster, which also served to reduce the lenders' exposure.

Once the housing cycle cooled down, though, reality checked in. Subprime borrowers defaulted at a higher than expected rate. Duh, why do you think they couldn't qualify for conventional financing in the first place?

The real exposure is to those hedge funds and lenders who did it to themselves by overweighting these loans, and this had little or nothing to do with the Fed's actions of the last two days. Shortfalls in liquidity disrupt the system, and avoiding that is one of the main objects of having the FRB system.

No one was "bailed out," except the system itself. No private bank got any free federal money, no private citizen got his mortgage paid.




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