Redstate

Posted at 8:38am on Apr. 1, 2008 Finally, a Winning Formula at the Federal Reserve?

The Term Securities Lending Facility May Be Working

By blackhedd

As much as I hate to subject you all to this, here's a piece of seriously complex Federal Reserve news. I'll explain it as best I can, however. The bottom line appears to be: it's good news.

You've certainly heard that the Bernanke Fed have been doing unprecendented, aggressive and creative things in their attempts to stabilize financial markets. (To mitigate the effects of a US recession is an entirely different problem, and not the current priority.)

One of the things the Fed did was to set up a Term-Securities Lending Facility, or TSLF. What the heck is that?

It's a weekly auction, to be held every Thursday for the next six months. The Fed will offer liquid, risk-free Treasury securities from its inventory, in return for specific kinds of risk-bearing securities, notably mortgage-backed securities. They just held the first one on March 27, and although the results are not unambiguous, the auction does seem to have had a material positive impact on the money markets.

Keep reading.

Posted in Economy | federal reserve | housing | Mortgage Crisis | Subprime | Term Securities Lending Facility — Comments (18)/ Email this page » / Read More »

Posted at 7:20am on Mar. 12, 2008 Why the Stock Market Went Up 400 Points Yesterday

The Fed acts on Mortgage-backed securities

By blackhedd

After three days in a row in which the Dow Jones Industrials Average fell by more than 100 points, taking it to a multi-year low, stocks rallied sharply in New York on Tuesday. Meanwhile, the dollar rose from just under $1.55 against the euro to about $1.534, and crude oil (a hedge against dollar-inflation) fell to about $108.

As they smiled over the discomfiture of New York State Governor Eliot Spitzer, Wall Streeters reversed yesterday because of an announcement by the Federal Reserve: an unusual new asset-trading facility that, it is hoped, will stabilize markets for securities backed by mortgages that are not subprime.

You may have read the piece I posted on this subject here on Monday morning. At the Fed, they evidently read the same tea leaves and decided on a drastic course of action.

More...

Posted in Economy | federal reserve | Term Securities Lending Facility | TSLF — Comments (22)/ Email this page » / Read More »