thoughts on reasons for FED and bank actions

[JBurkett19]

I was wondering if folks could comment on what’s written below. How close to reality are these thoughts? I did not major in Economics so I could be way off.

Putting the original bank bail-out aside, isn’t the FED keeping interest rates low so that banks can borrow for very little and generate more profits? Isn’t this being done so that they can, in theory, be encouraged to put more capital to work in the system? And also have more money to put toward nonperforming bad housing debt or potential MBS buy-backs? If this is true, why should we be worried about the banks ability to cover bad housing debt? Haven’t they made mucho dinero due to the low FED rates over the past eighteen months? Also, since a lot of the housing debt is held by FANNIE & FREDDIE, why can’t the government insist on the banks paying a higher interest rate on the money they have sitting at the FED? Couldn’t the interest collected be used cover the bad housing debt?

Lastly, I have a question that’s less specific. Were the bail-outs and subsequent monetary policy measures, as well as QE1 & 2, done to keep financial status quo? In other words, has all of this been done to keep the “haves” and the “have-nots” in their proper places?

[Anonymous]

The “textbook” answer to government is keeping rates low is to encourage investment in general (including housing.)

If the return from interest payments was anywhere near enough to cover the loss of principal from bad loans, we really wouldn’t have problem to solve. No Economics degree necessary – just basic math.

As for the other line of questions, correct answers will vary based upon your personal degree of paranoia and/or cynicism.

[Anonymous]

The “textbook” answer to government is keeping rates low is to encourage investment in general (including housing.)

If the return from interest payments was anywhere near enough to cover the loss of principal from bad loans, we really wouldn’t have problem to solve. No Economics degree necessary – just basic math.

As for the other line of questions, correct answers will vary based upon your personal degree of paranoia and/or cynicism.

[Anonymous]

The “textbook” answer to government is keeping rates low is to encourage investment in general (including housing.)

If the return from interest payments was anywhere near enough to cover the loss of principal from bad loans, we really wouldn’t have problem to solve. No Economics degree necessary – just basic math.

As for the other line of questions, correct answers will vary based upon your personal degree of paranoia and/or cynicism.

[Anonymous]

The “textbook” answer to government is keeping rates low is to encourage investment in general (including housing.)

If the return from interest payments was anywhere near enough to cover the loss of principal from bad loans, we really wouldn’t have problem to solve. No Economics degree necessary – just basic math.

As for the other line of questions, correct answers will vary based upon your personal degree of paranoia and/or cynicism.

[Anonymous]

The “textbook” answer to government is keeping rates low is to encourage investment in general (including housing.)

If the return from interest payments was anywhere near enough to cover the loss of principal from bad loans, we really wouldn’t have problem to solve. No Economics degree necessary – just basic math.

As for the other line of questions, correct answers will vary based upon your personal degree of paranoia and/or cynicism.

[JBurkett19]

Thanks for this. I appreciate your explanation. It makes sense that the interest earned from bank deposits at the FED wouldn’t be enough to cover the losses. But, since banks are being demonized because they’re not putting more money to work, this may be a way to get some back and put it work for real?

I sensed that my last question was a bit cynical. Thanks for your brilliant way in answering, however, isn’t cynicism sometimes the “…unpleasant way of saying the truth.”

[JBurkett19]

Thanks for this. I appreciate your explanation. It makes sense that the interest earned from bank deposits at the FED wouldn’t be enough to cover the losses. But, since banks are being demonized because they’re not putting more money to work, this may be a way to get some back and put it work for real?

I sensed that my last question was a bit cynical. Thanks for your brilliant way in answering, however, isn’t cynicism sometimes the “…unpleasant way of saying the truth.”

[JBurkett19]

Thanks for this. I appreciate your explanation. It makes sense that the interest earned from bank deposits at the FED wouldn’t be enough to cover the losses. But, since banks are being demonized because they’re not putting more money to work, this may be a way to get some back and put it work for real?

I sensed that my last question was a bit cynical. Thanks for your brilliant way in answering, however, isn’t cynicism sometimes the “…unpleasant way of saying the truth.”

[JBurkett19]

Thanks for this. I appreciate your explanation. It makes sense that the interest earned from bank deposits at the FED wouldn’t be enough to cover the losses. But, since banks are being demonized because they’re not putting more money to work, this may be a way to get some back and put it work for real?

I sensed that my last question was a bit cynical. Thanks for your brilliant way in answering, however, isn’t cynicism sometimes the “…unpleasant way of saying the truth.”

[JBurkett19]

Thanks for this. I appreciate your explanation. It makes sense that the interest earned from bank deposits at the FED wouldn’t be enough to cover the losses. But, since banks are being demonized because they’re not putting more money to work, this may be a way to get some back and put it work for real?

I sensed that my last question was a bit cynical. Thanks for your brilliant way in answering, however, isn’t cynicism sometimes the “…unpleasant way of saying the truth.”

[Diego Mamani]

It’s not FED. The correct name, an abbreviation really, is Fed. It’s short for Federal Reserve Board, or FRB.

[Diego Mamani]

It’s not FED. The correct name, an abbreviation really, is Fed. It’s short for Federal Reserve Board, or FRB.

[Diego Mamani]

It’s not FED. The correct name, an abbreviation really, is Fed. It’s short for Federal Reserve Board, or FRB.

[Diego Mamani]

It’s not FED. The correct name, an abbreviation really, is Fed. It’s short for Federal Reserve Board, or FRB.

[Author]

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