Comments on: Fed To Now Consider Buying Companies’ Unsecured Debt.

By: Companies NEED debt to pay payroll | Momma's Blog

Companies NEED debt to pay payroll | Momma's Blog — Wed, 08 Oct 2008 14:09:03 +0000

[...] Fed to Now Consider Buying Businesses Unsecured Debt: My Two Dollars [...]

By: WealthBoy

WealthBoy — Tue, 07 Oct 2008 16:42:58 +0000

The NYT article does say:

“While the move will put more taxpayer dollars at risk, it underscores the growing sense of urgency felt by policy makers in a climate where lending has virtually dried up.”

I’m not really exactly sure what the authors mean when they say it will put more taxpayer dollars at risk. That statement doesn’t make much sense to me. If the Fed incurs any losses on the commercial paper, it would represent a loss for the Fed not for taxpayers. It’s too bad the NYT doesn’t have comments. I would definitely ask them to elaborate on that particular point and explain how exactly it puts more taxpayer dollars at risk.

By: david

david — Tue, 07 Oct 2008 16:05:48 +0000

The NYTimes article is linked from my post here. As for the others, they are long gone (wrote this late last nite) but if I can find them, will def. post them up here.

I understand that the Fed supposedly is independent, but I am starting to doubt that reality in the current situation.

By: WealthBoy

WealthBoy — Tue, 07 Oct 2008 15:50:03 +0000

Can you site the articles? I'd like to read them. The Fed generates its own revenue primarily from interest on U.S. government securities. Take a look from the P&L from last year. No where on the income statement does it say anything about revenue from taxes. I suppose you could argue that they indirectly make money from taxes since they are the recipient of the interest paid on our national debt. However, I believe the Fed already has the capital on hand to purchase the commercial paper they're buying. I don't believe they would have the capability to implement strategies like this so quickly if they didn't.

By: david

david — Tue, 07 Oct 2008 14:45:23 +0000

WB: 3 different articles I read yesterday – the one in the NYT, one over at Bloomberg, and one somewhere else – all said that they would be using more taxpayer money for this. So I am curious why you think they won’t be?

By: WealthBoy

WealthBoy — Tue, 07 Oct 2008 14:22:24 +0000

The Federal Reserve is actually independent within government and generates its own revenue with Open Market Operations. The money the Fed will use to purchase the commercial paper won't come from taxes. The purchase and sale of securities is part of what they do to implement monetary policy. They primarily do this with Treasury securities but commercial paper isn't out of the question either as they have demonstrated today. I think that it is actually a fairly reasonable action to help provide liquidity to the credit markets.

By: DadTopics

DadTopics — Tue, 07 Oct 2008 13:37:55 +0000

Right on! We have to let the markets purge themselves. These bailouts are a waste of money. Sure, some of it will come back, but it was better left alone.

By: Miranda

Miranda — Tue, 07 Oct 2008 12:44:30 +0000

Well said! This is moving into a realm so far beyond ridiculous. SO, this time “trickle down” will work? Just like bailing out the top was supposed to work? Now we’re going to pay off their unsecured debt? I’d like my credit card debt paid off, please. Oh wait. I don’t have $100 billion in assets under management. I’m not rich enough to need it…