Re:Why the Federal Reserve is pouring money into the financi...
by sedeki on Friday September 20, 2019 @08:57AM
(#21026156)
I mean that given that the Fed will act if the banks do nothing, and that doing something will make the banks loose money, it is inevitable that the banks will "drag their feet". As you understand, I am not commenting on the moral aspect.
Re:Why the Federal Reserve is pouring money into the financi...
by pmart123 on Friday September 20, 2019 @09:05AM
(#21026226)
Part of the problem is the fed has tried to raise short term rates while the rest of the world has had a zero interest rate policy. Meanwhile, the US interest rate curve is inverted. So banks, who typically lend long and borrow short get squeezed. So even if the fed is targeting 2% rates, but the 10 yr is at 1.5%, a bank really shouldn’t be borrowing from you at 2% to lend it out to someone else at 1.5% on a ten year loan.
Re:Why the Federal Reserve is pouring money into the financi...
by istrading on Friday September 20, 2019 @09:58AM
(#21026709)
Maybe it's because the rest of the world can though. If you look at the debt to GDP ratio of Germany, Russia, China, it is much lower than the United States. Recently it was reported by AB Bernstein that the Debt-To-GDP ratio in the United States -- the real Debt-To-GDP Ratio -- is 1,832%!!
https://interactiveswingtrading.com/2019/09/09/ab-bernstein-...
The fed is doing the same thing by stepping in and manipulating the overnight rate. Without the fed doing this, banks would have to plan ahead and make sure they have sufficient liquidity. This means maybe offering better interest rates to earn customer deposits.
With the major banks still calling 0.05% “high yield”, I don’t think it’s appropriate for the fed to continue to enable their incompetence. Furthermore, the banks hold a significant inventory of foreclosed homes on their books. They’ve been sitting on them for years. It’s time they sell that resource to people who need them.