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Strategies & Market Trends : The Residential Real Estate Crash Index -- Ignore unavailable to you. Want to Upgrade?

To: coug who wrote (109217)	3/12/2008 12:02:31 AM
From: patron_anejo_por_favor	Respond to of 306849

This is quite fascinating. A publication by the Fed, on their own website that questions the legality of what they are currently proposing! See pp 57-58: federalreserve.gov While purchases of eligible private-sector credit instruments may be a way in which the Federal Reserve could provide stimulus to aggregate demand, a program of such purchases has potential problems of its own. By deciding which securities it was willing to purchase at which prices, the Federal Reserve would be placing itself in the business of evaluating credit risk. And by doing so, it would be aecting the allocation of credit across rms and households. The Federal Reserve does not possess any comparative advantage relative to the private market in doing such credit evaluations, and credit-risk evaluations and credit allocations could well suer as a consequence. Table 6.2 provides a summary of the private-sector assets that the Federal may and may not purchase. 57 Table 6.2 Private-Sector Assets Eligible and Ineligible for Purchase by the Federal Reserve 1. There is No Express Authority for the Federal Reserve to Purchase: Corporate Bonds Commercial Paper Mortgages Equity Land (Other that Federal Reserve premises) 2. The Federal Reserve May Purchase Gold* Foreign Exchange Bankers' Acceptances Bills of Exchange Subject to: Restriction 1. Purchases of foreign exchange, bankers' acceptances, and bills of exchange are to be in the open market. Restriction 2. In usual circumstances The bills of exchange must meet the \real bills" doctrine but, it seems, bankers' acceptances do not. In \unusual and exigent" circumstances The types of bills of exchange that are eligible to be purchased are open to interpretation. * Subject to the Gold Reserve Act of 1934. I suggst downloading the PDF and copying it to a Word File. I strongly doubt it will still be posted by tomorrow.....<NG>