Off topic question

Hi, in the last days the news said that the banks (or some banks) made huge profits. At the same time, if I remember correctly, the FED bought a lot of toxic papers, like MBS's off the banks. So I wonder if the profits are because these toxic things are off their balance books, and also, why does the FED not make the banks buy back at least so much toxic stuff, so that they just break even, which might mean, not many bonunses are getting paid? Where am I wrong with this? Thanks, gis

The reason that you are wrong is that you are making a huge mistake. You are making an argument that uses at least a measure of good common sense.

Hi,

in the last days the news said that the banks (or some banks) made huge profits.
At the same time, if I remember correctly, the FED bought a lot of toxic papers, like MBS's off the banks.
So I wonder if the profits are because these toxic things are off their balance books,
and also, why does the FED not make the banks buy back at least so much toxic stuff, so that they just break even, which might mean, not many bonunses are getting paid?

Where am I wrong with this?

Thanks, gis

Banks own the fed! got to keep those vaults full of cash..... and bonuses as high as ever.!

It's time you guys figure this out....it 's not hard.


GS.

OK, here it is. First of all, Fed is still buying these assets and it has a large portfolio of MBS now, it did not even begin liquidating anything yet. Fed might have to hold these to maturity.

After Fed either collects the interest and principal (mortgage) to maturity, they can return the profits to Treasury, OR Fed may choose to sell them back slowly as the market stabilizes without holding until the maturity AND return the profits to Treasury.

Right now, Fed is in no position to really unload this back to banks since the market is still fragile AND there is no way of knowing exactly how much of Fed's holdings are already defaulting since Fed is not really audited either. Another big problem is this buying requires a lot of printing and it is inflationary.

OTOH, Fed will be done unloading its other short term funding facilities by Feb 1st as it said in the previous FOMC and it did not really so far create an huge sell off because they kept buying the MBS at least. Apparently, the big deal that lets the banks operate is this buying of MBS...

Fed made a very good profits of $45B from its other short term facilities in 2009 that it opened up in 2008 during the panic, BUY LOW SELL HIGH! WAY TO GO BEN!

You guys are becoming so cynical. It's about time.

You guys are becoming so cynical.

It's about time.

My response was not cynical, it is what it is!

Pretty obvious it's not the government that regulates the banks... It's the other way around...

The basic rule of the government/bank relationship is . . . . "Privatize the Profits, Socialize the Losses" It would lead to a total collapse of our very fragile banking system if the banks had to take losses on the toxic paper rather than seven and eight figure bonuses. That's what they have government and taxpayers for (sarcasam off).

Hi,

in the last days the news said that the banks (or some banks) made huge profits.
At the same time, if I remember correctly, the FED bought a lot of toxic papers, like MBS's off the banks.
So I wonder if the profits are because these toxic things are off their balance books,
and also, why does the FED not make the banks buy back at least so much toxic stuff, so that they just break even, which might mean, not many bonunses are getting paid?

Where am I wrong with this?

Thanks, gis

A high percentage of the crappy assets the Fed took onto its balance sheet will be dumped onto the taxpayer, one way or another. Won't be obvious to lay observers, but that's how it will go down.

A high percentage of the crappy assets the Fed took onto its balance sheet will be dumped onto the taxpayer, one way or another. Won't be obvious to lay observers, but that's how it will go down.

It already happened in 2009 in my opinion, FRE/FNM will never come out of government conservatorship...