Bernanke's Nightmare Chart

Gary North / LewRockwell.com:
The Federal Reserve System on December 17 began a unique experiment: debt swaps with large commercial banks. The FED is now swapping at face value highly marketable U.S. Treasury securities in exchange for discounted mortgages. Nothing like this has ever been attempted before. It represents an innovation in central bank policy. It is called the Term Auction Facility (TAF). The initial offer was for $20 billion in swaps. Since that time, the 28-day swaps have risen in volume to $75 billion. As of May 5, according to the FED, $150 billion in TAF swaps have taken place. The rate charged is about 2%. This is why the FED has cut the FedFunds rate to 2% – not to stimulate the economy directly but to make available TAF loans at low rates. Here is how the game is played.

Posted by Editor at May 7, 2008 07:32 AM