Banking Crisis and Erosion of Prosperity Message Board

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Politics : Banking Crisis and Erosion of Prosperity

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To: Nicholas Thompson who wrote (2)	4/5/2009 9:22:03 PM
From: Rational	Read Replies (1) of 4

Have you noticed that the U.S. has defaulted on its debt? How? It is by printing money. The Federal Reserve has been printing money. Last year, FRB gave away about $2.3T to banks so that they could repay their higher rate loans. Some days ago the FRB announced that it will give $1.2T to Fannie and Freddie to refinance higher rate loans of prime mortgage holders. Refinancing prime mortgages may appear to be fair to households especially when defaulting banks are being funded. But banks get funds created for them by FRB at 0%. But is it really fair? Many banks, especially the major ones, have gone broke by gambling away their funds. They cannot be called prime. Yet the FRB has created money to replenish these sub-prime banks' accounts at 0%. The prime households will have to pay, however, 4.5% to 5.0%. Can this system of governance be sustained? Banks cannot make money (profits) if the prime households only refinance their existing loans at lower rates without borrowing more. We may be in a very precarious situation.

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