I used to write about the Federal Reserve much more* than I have recently, but at some point there's nothing new to add.
Commenting on the Fed shoveling money through the bank's income statements to the balance sheets is so 2008:
"Mom, Ben Bernanke Likes Bankers Better than He Likes You"
Savers are getting screwed as banks reliquify their balance sheets.Here's the latest, from Bloomberg:
The ostensible reason short rates are now officially at 0.2% is to encourage banks to lend.
It's not going to happen. The banks are not taking on individual's or commercial's risk. Auto loans for a FICO score of less than 720 aren't being written.
So what are they doing? Carry-trade (say it like "Toga party").
For months, the borrow U.S. short, lend U.S. long has been used to rebuild banks balance sheets, destroyed by their former business practices....
The gap between U.S. bank deposits and loans is growing at the fastest pace in two years, providing lenders with more funds to buy bonds and temper the biggest sell-off in Treasuries since 2010.HT: FT Alphaville
As deposits increased 3.3 percent to $8.88 trillion in the two months ended July 31, business lending rose 0.7 percent to $7.11 trillion, Federal Reserve data show. The record gap of $1.77 trillion has expanded 15 percent since May, the biggest similar-period gain since July, 2010. Banks have already bought $136.4 billion in Treasury and government agency debt this year, more than double the $62.6 billion in all of 2011, pushing their holdings to an all-time high of $1.84 trillion....MORE
In the run-up to the debacle we were posting stuff like:
Feb. 8, 2008
Doom and Gloom: What Can the Federal Reserve Do?
Doom and Gloom: What Can the Federal Reserve Do? Part II
We left part I at the "Money Rain" section of the Fed paper Monetary Policy When the Nominal Short-Term Interest Rate is Zero.Mar. 17, 2008
The paper's conclusions are worth an extended exerpt....
The Federal Reserve's "Extraordinary Actions"
July 11, 2008
Federal Reserve: Send in the Helecopters, No GSE Left Behind (FNM; FRE)
We have previously posted these insightful commentaries:
From Depression risk might force U.S. to buy assets:
September 15, 2008 was a very bad day:
Federal Reserve Accepting EQUITIES as Collateral
Bernanke Violates Federal Reserve Act Section 23A
And many, many more.