Federal Reserve Response
In an effort to increase available funds for commercial banks and lower the fed funds rate, on September 29, 2008 the U.S. Federal Reserve announced plans to double its Term Auction Facility to $300 billion. Because there appeared to be a shortage of U.S. dollars in Europe at that time, the Federal Reserve also announced it would increase its swap facilities with foreign central banks from $290 billion to $620 billion.
On November 25, 2008 the Fed announced it would buy $800 billion dollars of debt and mortgage backed securities, in a fund separate from the 700-billion dollar Troubled Asset Relief Program (TARP) that was originally passed by Congress. According to the BBC, the Fed would use the fund to buy the following:
- up to $100bn in debt from Fannie Mae and Freddie Mac
- up to $500bn in mortgage-backed securities
The fund would also be used to loan up to $200bn to the holders of securities backed by various types of consumer loans, such as credit cards and student loans, to help unfreeze the consumer debt market. According to a Des Moines Register editorial, it is not clear whether bodies that oversee the TARP will oversee Paulson's control of the Fed's $800 billion loan and bond actions.
As of December 24, 2008, the Federal Reserve had used its independent authority to spend $1.2 trillion on purchasing various financial assets and making emergency loans to address the financial crisis, above and beyond the $700 billion authorized by Congress from the federal budget. This includes emergency loans to banks, credit card companies, and general businesses, temporary swaps of treasury bills for mortgage-backed securities, the sale of Bear Stearns, and the bailouts of American International Group (AIG), Fannie Mae and Freddie Mac, and Citigroup.
In May 2013 as the stock market was hitting record highs and the housing and employment markets were improving slightly the prospect of the Federal Reserve beginning to decrease its economic stimulus activities began to enter the projections of investment analysts and affected global markets.
Read more about this topic: Federal Reserve 800 Billion Dollar Consumer Loan And Bond Plan
Famous quotes containing the words federal, reserve and/or response:
“[M]y conception of liberty does not permit an individual citizen or a group of citizens to commit acts of depredation against nature in such a way as to harm their neighbors and especially to harm the future generations of Americans. If many years ago we had had the necessary knowledge, and especially the necessary willingness on the part of the Federal Government, we would have saved a sum, a sum of money which has cost the taxpayers of America two billion dollars.”
—Franklin D. Roosevelt (1882–1945)
“Mutual repect implies discretion and reserve even in love itself; it means preserving as much liberty as possible to those whose life we share. We must distrust our instinct of intervention, for the desire to make one’s own will prevail is often disguised under the mask of solicitude.”
—Henri-Frédéric Amiel (1821–1881)
“Play for young children is not recreation activity,... It is not leisure-time activity nor escape activity.... Play is thinking time for young children. It is language time. Problem-solving time. It is memory time, planning time, investigating time. It is organization-of-ideas time, when the young child uses his mind and body and his social skills and all his powers in response to the stimuli he has met.”
—James L. Hymes, Jr. (20th century)