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To: Think4Yourself who wrote (75811)	3/9/2008 11:23:43 AM
From: KyrosL	Read Replies (1) \| Respond to of 116555

It's not as simple as that. The lowest collateral the Fed is accepting is Agency paper. The only entities that can issue that are the GSEs. And they are now under strict supervision to maintain adequate capital ratios and greatly reduce the risk of the loans they are accepting. What the Fed is doing is it temporarily bypasses Treasury and Congress to guarantee Agency paper. My guess is they will keep doing this until the crisis passes, which may be a long time. As long as this lasts, Agency paper is as good a Treasuries, since it can be readily exchanged for cash at low interest rates at the Fed. PS You are right that the banks can use the cash they get for the Agencies they pledge to make loans. But right now making loans is the last thing on their minds. They are in circle the wagons mode. When they start making loans with this money, the crisis will have passed and the Fed will promptly withdraw the facilities.