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Federal Reserve pledges asset purchases with no limit to support markets

cnbc.com

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Re: Federal Reserve pledges asset purchases with no limit to support markets

#31

Post by kragen »

> Several leading Wall Street bankers met to find a solution to the panic and chaos on the trading floor.[9] The meeting included Thomas W. Lamont, acting head of Morgan Bank; Albert Wiggin, head of the Chase National Bank; and Charles E. Mitchell, president of the National City Bank of New York. They chose Richard Whitney, vice president of the Exchange, to act on their behalf.

> With the bankers' financial resources behind him, Whitney placed a bid to purchase a large block of shares in U.S. Steel at a price well above the current market. As traders watched, Whitney then placed similar bids on other "blue chip" stocks. The tactic was similar to one that had ended the Panic of 1907, and succeeded in halting the slide. The Dow Jones Industrial Average recovered, closing with it down only 6.38 points for the day.

— https://en.wikipedia.org/wiki/Wall_Street_Crash_of_1929

Re: Federal Reserve pledges asset purchases with no limit to support markets

#32

Post by eternalny1 »

brenden2 wrote: post #9

Keep in mind they're only able to buy US treasuries and mortgage backed securities. If Congress changes the rules to allow the Fed to purchase stocks, we'll be in for some very interesting times. It could be that we get an economy of zombie companies, or valuations soar beyond what we've come to expect as normal. In any case, this is unprecedented and in my opinion not the right move. They're sacrificing our future i…

> Keep in mind they're only able to buy US treasuries and mortgage backed securities.

It's those MBS that were the real problem. Total panic on Wall Street with those, because everyone is so heavily tied into them and with all these unemployed people, foreclosures are going go through the roof.

Now that they can offload them to the Fed instead of trying to sell them for pennies on the dollar, it's all champagne and caviar back on Wall Street.

Re: Federal Reserve pledges asset purchases with no limit to support markets

#33

Post by squaresmile »

spdy wrote: post #28
brenden2 wrote: post #9

Keep in mind they're only able to buy US treasuries and mortgage backed securities. If Congress changes the rules to allow the Fed to purchase stocks, we'll be in for some very interesting times. It could be that we get an economy of zombie companies, or valuations soar beyond what we've come to expect as normal. In any case, this is unprecedented and in my opinion not the right move. They're sacrificing our future i…

Look at the ECB they are buying stocks for quite some time now. https://www.ecb.europa.eu/mopo/implement/omt/html/index.en.h...

and BOJ https://www3.boj.or.jp/market/en/menu_etf.htm

The scale of BOJ's ETF purchases is quite something.

Re: Federal Reserve pledges asset purchases with no limit to support markets

#34

Post by [deleted] »

rubber_duck wrote: post #21
brenden2 wrote: post #9

Keep in mind they're only able to buy US treasuries and mortgage backed securities. If Congress changes the rules to allow the Fed to purchase stocks, we'll be in for some very interesting times. It could be that we get an economy of zombie companies, or valuations soar beyond what we've come to expect as normal. In any case, this is unprecedented and in my opinion not the right move. They're sacrificing our future i…

Wouldn't this mean that FED, which already has the control over the money supply, can now go and buy companies with the money it creates ? If you define FED as a private entity - this sounds like theft. If you define it as a part of the government then you are transitioning to socialism (government ownership of means of production). Neither of these sounds like something that would be acceptable in the US political s…

[deleted]

Re: Federal Reserve pledges asset purchases with no limit to support markets

#35

Post by dredmorbius »

Additional coverage:

https://www.washingtonpost.com/business/2020/03/23/fed-unlim...

https://www.nytimes.com/2020/03/23/world/coronavirus-news.ht...

https://www.wsj.com/articles/federal-reserve-announces-major...

https://www.foxbusiness.com/business-leaders/fed-takes-actio...

https://www.ft.com/content/b71f0c32-6cfb-11ea-89df-41bea0557...

https://www.theguardian.com/business/live/2020/mar/23/market...

https://www.reuters.com/article/us-health-coronavirus-usa-fe...

(Feel free to add others here.)

Re: Federal Reserve pledges asset purchases with no limit to support markets

#37

Post by QuesnayJr »

eternalny1 wrote: post #32
brenden2 wrote: post #9

Keep in mind they're only able to buy US treasuries and mortgage backed securities. If Congress changes the rules to allow the Fed to purchase stocks, we'll be in for some very interesting times. It could be that we get an economy of zombie companies, or valuations soar beyond what we've come to expect as normal. In any case, this is unprecedented and in my opinion not the right move. They're sacrificing our future i…

> Keep in mind they're only able to buy US treasuries and mortgage backed securities. It's those MBS that were the real problem. Total panic on Wall Street with those, because everyone is so heavily tied into them and with all these unemployed people, foreclosures are going go through the roof. Now that they can offload them to the Fed instead of trying to sell them for pennies on the dollar, it's all champagne and c…

These are agency MBS, which are already backed by the US government, so Wall Street was already pre-bailed-out on them. They already had that champagne and caviar.

Re: Federal Reserve pledges asset purchases with no limit to support markets

#38

Post by toomuchtodo »

squaresmile wrote: post #33
spdy wrote: post #28

Earlier quoted context omitted.

Look at the ECB they are buying stocks for quite some time now. https://www.ecb.europa.eu/mopo/implement/omt/html/index.en.h...

and BOJ https://www3.boj.or.jp/market/en/menu_etf.htm The scale of BOJ's ETF purchases is quite something.

A foreshadowing of all developed country central banks’ actions.

It’s only a matter of time before the Fed, BOE, and the ECB do so at similar scale.

Incredibly disappointing as an educated investor that you must be judicious about asset acquisitions and allocations, and yet central banks just make the money printer go brrrrr when they deem it necessary (something, somewhere is always “too big to fail”).

Re: Federal Reserve pledges asset purchases with no limit to support markets

#39

Post by fallingfrog »

If a meteor was headed for the earth tomorrow, the president would get up in front of the nation and say, “my fellow Americans, we have created 100 trillion dollars of imaginary money in a database in upper Manhattan, so everything will be fine..”

Re: Federal Reserve pledges asset purchases with no limit to support markets

#40

Post by matthewdgreen »

CyanLite4 wrote: post #23
alexmingoia wrote: post #7

How does injecting money solve a problem that’s not caused by lack of money? This market downturn isn’t a lack of liquidity, or a lack of money, or toxic assets like the mortgage backed securities. People aren’t going to stores, restaurants, and airlines because of SARS-CoV-2, not a lack of credit or money. Printing money isn’t going to create customers for businesses effected by this pandemic.

It stops the stock market slide. Which is more valuable than political talking points. Eventually these bankers are going to start doing some math and see that with 0% interest rates and unlimited firepower on Treasuries, there’s going to be massive pent up demand after this medical crisis is solved. Money will be lent to everyone, including airlines and leisure companies because there’s simply no where else to put t…

I think it's just as likely that the markets will simply stop performing any sort of useful price discovery function, leading to huge misallocations of productive resources -- resources we desperately need right now.
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