In a Bloomberg article today, Federal Reserve Vice Chairman Donald Kohn said that the central bank’s emergency lending programs aren’t creating a significant risk for U.S. taxpayers and went on to clarify that the major sense of security is prompted by the quality of the collateral pledged against these loans. To quote Kohn:
“We are not taking significant credit risk that might end up being absorbed by the taxpayer. For almost all the loans made by the Federal Reserve, we look first to sound borrowers for repayment and then to underlying collateral.”
(chart hat tip Richard)
6 Responses to “The Evaporating Collateral Of The United States”
When we hit 50% unemployment, we’ll have a revolution. That’s what we’re waiting for. Don’t expect anything but more corruption, until then. Why even bother writing columns like these.Read my book instead, The Eminent Domain Revolt. Why? Because what’s happening is that the scrutiny regime of West Coast Hotel v. Parrish (1937) is collapsing and the maintenance regime, which I describe in the book, is coming into power.How many dead bodies between the scrutiny regime and the maintenance regime? Who the hell knows?Cheers,John Ryskamp
SPAM is not welcome here, I hope this post is removed and your IP blocked, permanently. GO AWAY. I’m sick of websites being ruined by this sort of abuse.
“SPAM is not welcome here, I hope this post is removed and your IP blocked, permanently. GO AWAY. I’m sick of websites being ruined by this sort of abuse”The same could be saif of Mr Ryskamp’s response, no?
The credit quality of the collateral the fed has been accepting has been at question for some time. Hence the reasoning behind the fed’s refusal to disclose this information. The fed and the treasury will abuse this capacity until it collapses upon itself or the miraculous recovery materializes. The inability of the government (yes, the fed is included) to shoot straight with those that are governed and ultimately financially liable for their decisions may well be the catalyst for the complete breakdown in governing authority.
I’m not trained in economics, but have a post-graduate education in the social sciences. It seems to me that the entire rescue program is bound to fail for the following reason: A meta assumption of the “We’ll spend our way out of this” team appears to be that consumer demand will not only take on the same pattern of consumer goods desired prior to the crash, but will also reach the same volumes, and then continue to grow some. Pre-crash manufacturing capacity assumes such a rapid rate of consumerism will return. But, the loss of personal wealth is wide-spread and huge, (without even taking into account the distribution of loss for the minority wealthy to tax-payers, through the various rescue packages) and consequently the spirit of the age has turned. “We the People” don’t need to buy new computers, cars, plastic rubbish bins etc at the rate at which they were being bought. And that’s where the massive rescue plans just plan comes unstuck …. or does it?I hope someone with far more insight, and clarity of expression can post a response that will point out follies in my thinking. I look forward to sleeping better at night.RegardsGerry