Pilgrim, yesterday I suggested that the Federal Reserve Bank should stop increasing rates and actually reduce them by a percentage point … in order to increase the market value of the bond portfolios of those banks in jeopardy.
Of course, this solution would cause inflation to persist but might keep the wolf from the door of many shaky banks.
But, our clever swamp creatures pulled the taxpayer rabbit out of their underwire with a very insidious solution which “doesn’t cost the taxpayers anything.” They agreed to buy back any government bonds from these banks AT FACE VALUE despite the fact that they may have lost substantial market value … and wouldn’t be eligible for face value redemption for 10, 20 or even 30 years.
Does this move cost the taxpayer anything … the difference between the market and face values?
Pilgrim, I’ll assume, if you have a triple digit IQ, you can figure this out … and also you are a taxpayer.
Biden implies that the government will recover this difference by increasing the FDIC insurance fees … if, so, it might take quite a number of years … and not dealing with those banks that don’t carry such insurance … which we taxpayers would be fully bailing out.
(Thanks to Dan Bongino for revealing the bond buyback wrinkle.)
Afterward: Banking friend responds — “what's really happened is:
The Federal Reserve announced it will create a Bank Term Funding Program (BTFP). This program allows banks to pledge US Treasuries and other high-quality securities as collateral – at par – for a loan of up to one year.
So they're not buying the bonds at par, but letting them be used as collateral for loans. Used to be that it wasn't 100% of face value, but a 5 to 10% haircut depending on security/maturity. Borrowers pay interest at the federal funds rate. So those Fed guys are smarter than we slugs, they figured out a solution that really doesn't hit the taxpayers.
Now you'll say that could be inflationary as it increases the money supply - and you're right! But its better than the other options.....”
My initial reaction to this is — our government complicates things in order to keep even the experts confounded. So, banks who would be borrowing against their bond portfolios are stressed … and, if they default on these loans, it is almost equivalent to our government buying their bonds at par. Not sure if interest payment required are in addition to increased FDIC hiked insurance rates … or if the latter are even needed.
STAND UP TO BIDEN’S WHOPPER’S!
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