Forum Post: The Federal Reserve and Wall Street should return their profits to the people
Posted 12 years ago on Oct. 9, 2011, 5:36 p.m. EST by FedWallFedWell
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The Fed lowered rates to lure people to spend in 2001...then IN RECKLESSNESS and GREED raised rates 17 times in row pushing millions of adjustable rate mortgaged homes into foreclosure...many of these homes were double and triple insured through repackaging on Wall Street. The Fed and Wall Street have reaped billions from these actions and have hurt billions of people AND have brought the world financial system to its knees. The Federal Reserve and banks should be forced to return its profits to the people.
• $16 Trillion is a number often referenced as the total bailout given to banks. This is the sum of all loans given out over a long length of time to banks from the Fed. Large banks have thousands of loans (Assets to the bank) maturing and deposits withdrawn (Liabilities to the bank) everyday. Sometimes, this activity does not net to zero and a particular bank is not able to meet the 10% reserve requirement of deposits at the Fed. Typically, the bank would seek to just borrow overnight money from another large bank that had a surplus reserve but the crisis escalated to the point that banks were unwilling to lend to each other out of fear of never getting repaid. Thus, the Fed stepped in to make multiple large but very short term loans that were trued up the next day. Had they not done this, we would have been much worse off today. • The Fed's actual purpose is 1. To create price stability and 2. To be the lender of last resort to banks. What it did during the Debt Crisis is completely consistent with its intended purpose. Furthermore, the Fed is actual capitalized through the aggregate of all US banks' reserve deposits. In other words, the Fed has money from the banks in the first place. • The Fed does not literally print money. The treasury print's the actual bills, which it then gives to the Fed. The Fed injects this into the economy through Open Market Operations. Meaning, it goes into the marketplace and buys various duration US government debt (T-bills and bonds). This may sound like the Fed gets free money but please keep in mind that the Fed is a quasi-government entity and is required to give all of its profit to the Treasury. So essentially, it's a clean swap, accounting wise, an exchange of US bonds for dollars. • Money multiplier and velocity of money. I see these terms used incorrectly all of the time. Money multiplies because every time someone makes a $100 deposit at the bank (surplus cash in the economy), the bank deposits the required 10% reserve at the Fed and reallocates the remaining $90 surplus to loans to people and businesses. The $90 ends up at another bank after it is spent by the people/business and that bank is now required to make a 10%, or $9, deposit at the Fed and free to make an $81 loan. This goes on until there is no more money left to loan. The end result with a 10% reserve requirement, $900 is created in the economy and $100 is held at the Fed. • The Fed is a quasi-government entity. Yes, they operate independently - and for a reason. Have you noticed how politicians spend money? Economics/Money Supply and Politicians should be kept as far away as possible. Can you imagine the swings in Fed policy as different parties get elected? Anyways, the Fed's Board of Governors are appointed by the POTUS. Additionally, there are a number of layers of additional personnel including banking representatives and representatives from all of the major industries in the US.
Government needs to step in and shore up the real estate market??? Is this mess the result of deregulation plus an evil genius plan to transfer the wealth of the middle and upper middle to the top 1 percent? Is this an economic war waged by economic elite irrespective of their nationalities? Just wondering...seems so orchestrated...raising rates 17 times in a row for FEARS of inflation. Like using a elephant (17 rate increases) to step on a fly (fear of inflation). Like smugly killing the patients to kill the disease.
Sorry Joe you are wrong..you offer a snapshot rather than the "movie" version of what happened. The Federal Reserve lowered rates after 2001 attack to stir the economy and lure people to spend. It is a fact that many of the adjustable rate mortgages are tied to the MTA...moving treasury average which is impacted by the Fed lowering rates in '01-'02 then raising rates in '03 to '05-'06. Same thing happened in the DEPRESSION of '29 read Bernanke's comments about this...anyway....rates were lowered to near zero in the 30s and it still did not get the country out of depression....too little action...all too late by that time the economy was destroyed! It took WWII spending and WPA to give people money and jobs again.
Sorry but first of all the Fed Rate is the lowest it has been in the history of it's existance. Also it is a short term loan rate, The Federal Reserve has nothing to do with mortgage rates.
Second the mortgage rates are the lowest they have been in 50 years.
The trouble with the mortgages had to do with the Community Reinvestment Act, Fannie May and Freddie Mac that allowed banks to make laons to people that could not afford to pay them.