March 17, 2008 General 0

Bear Sterns is being bailed out by the Fed and being sold for nearly pennies to JP Morgan Chase.  The Fed has also opened up unlimited lines of credit to the top 20 banks.  This means the dollar is going to plunge even worse than it has now and is only going to exacerbate the issues.  The fed is honestly powerless here…it is flooding the market with more debt when it’s too much debt that is the root cause of this issue.

As is quoted in the article (In an effort to stabilize the stock market, the Fed also took the extraordinary measure of lowering the discount rate by a quarter point, from 3.25 percent to 3.5 percent.

The discount window is a lending facility the Fed uses to lend money to banks on a short term basis, to meet liquidity needs.

Last night, the Fed announced money would be made available to the 20 large investment banks that serve as the “primary dealers” trading Treasury securities directly with the Fed, with no pre-determined limit on the amount of money a bank might borrow.

The idea is to allow the primary dealers to lend to banks on a short-term basis by holding as collateral hard-to-sell instruments in bank asset portfolios, including mortgage-backed securities that may have little or no true market value.)

…the fed is taking on the shaky and/or worthless mortgage backed securities to prop up the banks.  Frankly..let the banks sink under their own weight…this will keep them from making these bad decisions..unfortunately the fed’s bailout will only encourage this behavior and plunge this country even deeper into debt.