This is a bit of interesting news that came out of the Fed today:
The Federal Reserve announced on Tuesday that it will purchase as much as $600 billion worth of mortgage-backed assets from fledgling companies in hopes of jump-starting lending by banks nationwide.
But it was less than two weeks ago the Fed said:
Purchasing toxic assets from troubled lenders, once the centerpiece of the rescue effort, is now seen as “not the most effective way” to use the government funds, Paulson iterated.
What I cannot tell from the information released today is if the assets mortgage-backed assets the Fed will now purchase are toxic or not. Also, lost in the news coming out today is the fact that the Federal will lend up to $200 billion to holders of securities backed by consumer debt (credit cards, student loans, auto loans).
I almost get the feeling that the government is now in 100% reactionary mode, just throwing money at any problem they see. Remember, uncertainty creates fear.
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