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To: Elizabeth Andrews who wrote (13112)	6/26/2003 5:03:34 PM
From: jrhana	Respond to of 39344

<Fannie has to borrow to lend, the Fed doesn't> that makes sense everytime Fannie injects money into the system it also withdraws money from the system.

To: Elizabeth Andrews who wrote (13112)	6/26/2003 6:30:56 PM
From: jrhana	Read Replies (1) \| Respond to of 39344

How low can it go? sharelynx.net

To: Elizabeth Andrews who wrote (13112)	6/27/2003 12:07:07 AM
From: LLCF	Read Replies (2) \| Respond to of 39344

<My point is that we don't know what the money that the person that gets from Fannie does with it, except spend it, which is why I see it as a recycle function and not creating money.> Well, FNM essentially does the same function as a BANK, not Exxon, as far as I can see no? <Balance sheet leverage is different than the multiplier effect created by new money from the Fed to the banking system.> I'm confused as the 'multiplier effect' people use economically speaking vs fractional reserve banking that many claim 'creates' money. FNM seems to me to be much more like a bank, than Exxon. < Fannie has to borrow to lend, the Fed doesn't. It creates new money, which makes it quite different. > Yea, when it prints money... but when it creates credit in the banking system is that money? It sounds like you're saying banks are simply recyclers of money also? In fact they need reserves to lend against. It seems the fed's constant bickering about FNM's sliver of equity being large enough or not isn't much different than the different levels of 'capital' that banks keep to lend against. I'd like to hear input as to whether people believe the fractional reserve banking system 'creates' money?? IN any case FNM has essentially THE SAME rating in many peoples minds as the treasury... so it can borrow and lend FOREVER. Now is that creating money??? Maybe technically not, but it has the license [and has indeed been] to borrow at the best terms on the planet bar one in order to make loans on homes. If nothing else, they essentially allow the household unit to me much more leveraged than before ever before. IMO the effect FNM has had on the average persons leverage position blows away anything ever bank ever did. DAK

To: Elizabeth Andrews who wrote (13112)	6/27/2003 2:27:16 PM
From: GraceZ	Respond to of 39344

All the Fed does is raise reserves, money is created by the banks by lending on the reserves. The reason Fannie and Freddie do create money the same way a bank does has to do with fractional reserves and the fact that they have a lower reserve requirement than a commercial bank. Suppose they sell MBS to the public. The money to buy those bonds comes from a commercial bank which has say a 10:1 reserve requirement. That bank's reserves are lowered by the fractional amount, Fannie's reserves now rise by the same dollar figure, but they can write a higher ratio on that same dollar amount of reserves. They can lend more than the bank can on the same reserve. Total reserves haven't risen, but the money supply increases. That money was created by the loan.