View Single Post
Old 11-30-2011, 10:53 AM   #974
Cowboy89
Franchise Player
 
Cowboy89's Avatar
 
Join Date: Feb 2006
Location: Toledo OH
Exp:
Default

Quote:
Originally Posted by Muta View Post
A bit off topic, but related to the protests nonetheless:

http://rt.com/usa/news/fed-trillion-...e-bailout-401/

http://www.thenewamerican.com/econom...lion-this-time

Stories like these are why the OWS movement is happening. And if these stories are true, rightfully they should be.
First of all that $8 Trillion number is misleading.

Say I lent you a dollar and asked that you pay it back a day later. You follow through and pay me back a dollar the next day. Then say you come back a couple of days later and borrow another dollar and promptly pay it back the next day. The way that $8 Trillion is calculated it would imply I lent you two dollars, but in reality at no time did you owe me more than one dollar. Extrapolate my example to the largest banking institutions and the number of days in the time period measured and I can assure you that the amount of money owed to the Federal Reserve at any given time by these banks never appraoched $8 Trillion.

Second of all, by all means the Fed acted as lender of last resort when there was a liquidity crunch. This is actually what the Fed was created to do after the guilded age and the panics of 1907 and further reinforeced in the 1930s. Doing away with the Fed and it's job as lender of last resort is actually removing a safeguard on the financial system.

Third of all is that the reason for the secrecy of these transactions is that if the market knew on any given day how much a bank was tapping the Fed for or even that the bank needed to tap the fed there would be a run on said bank and it would likely go under right then and there defeating the purpose of being a lender of last resort.

Last edited by Cowboy89; 11-30-2011 at 10:58 AM.
Cowboy89 is offline   Reply With Quote
The Following 5 Users Say Thank You to Cowboy89 For This Useful Post: