From the L.A. Land blog in the L.A. times, today…….8/13/07.
Update on Fed’s intervention
When we reported last week on the Fed’s attempts to pump liquidity into the financial markets, we quoted two news organizations reporting that the Fed had purchased mortgage-backed securities, or MBS’s.
In the interest of setting the record straight, we note that Calculated Risk — an excellent blog on economic issues, btw — reports that, technically, that’s not exactly what the Fed did: …”the Fed didn’t buy ‘billions of dollars worth of crumbling bonds’. The MBS is just put up as collateral, and unless the banks go under in 3 calendar days, they will pay the loan back with 3 days of 5.25% interest. No big deal.”
More: “Technically the legal ownership of the collateral apparently does change hands, so saying the Fed is ‘buying’ is not completely inaccurate – just misleading.”
