"More than five years after the 2008 financial crisis, the Federal Reserve's role is still the subject of much debate. The fact that the Fed provided credit to financially troubled firms and now holds many of the bonds of these same firms on its balance sheet has caused many to question the financial strength of the Federal Reserve itself. Policymakers have expressed concerns over the amount of FannieMae--issued and FreddieMac--issued mortgage-backed securities that the Fed now holds. These purchases appear financially risky because they include some of the very same assets--the so-called toxic assets--that led to the financial crisis. The creation of money (for to-big-to-fail banks) through these Fed asset purchases raises concerns about the stability of the dollar and the specter of an inflation spike in the future.
One source of controversy has been the extent to which the Fed allocated credit directly to otherwise insolvent institutions. Critics argue that the Fed should have allowed insolvent firms to restructure through bankruptcy and should have provided credit only to sound banks on a short-term basis. Instead, the Fed facilitated bailouts to financially troubled institutions by invoking its so-called emergency lending authority. The government even forced some banks to take the money against their objections, so as not to allow the public to identify those banks that really were insolvent.
Even after financial markets stabilized, the Fed expanded its asset purchases because the recovery was slow to materialize. These ongoing monetary policies have come under fire for being ineffective, for exposing taxpayers to further losses, and for increasing the likelihood of future inflation because they were so aggressive. The scale of these operations is reflected in the growth of the Fed's balance sheet.
In particular, the Fed now holds more than 5X the amount of securities it had prior to the 2008 crisis. The Fed's balance sheet expanded from about $850 billion to more than $4.4 trillion. (See Chart 1 in article linked below.) The questionable value of these securities, as well as the Fed's various lending programs, has led many to question the financial strength of the Federal Reserve itself. The article linked here provides a brief discussion of the Fed's recent expansionary policies and their implications:
As Charles Hugh Smith said in a recent guest post at ZeroHedge.com:
The Federal Reserve is a criminal syndicate buying indebtedness (i.e. U.S. Treasury bonds, or T-bonds or T-bills) that the government (the U.S. Treasury) eagerly creates and sells, so as to supply the US government's spending money. The Fed then dumps this indebtedness on us civilians, i.e. we pay taxes, much of which are used to make interest payments to all the T-bill holders. What perplexes me is that the scam is so simple and yet the vast majority of 'intellectuals' either don't get it or are handcuffed by the mega-corporate media owners by whom they are employed and who in a very real sense own them.
The scam, in a simple yet expanded form, goes like this:
1. Uncle Sam borrows money from The Fed, China, oil exporters, Bank of England, etc. by selling them U.S. Treasury bonds.
Next Page 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9
(Note: You can view every article as one long page if you sign up as an Advocate Member, or higher).
4
3
2
