This is one of the reasons that mortgage rates are going up…..
by Tom on June 10, 2009
in Market Musings, banks
Now first, let me assert that this is strictly one person’s opinion, but I think it makes a lot of unfortunate sense. Let me explain:
- If the Federal Reserve were subject to the same requirements as normal banks are, they would fail.
- The requirements that “normal” banks are put to are not nearly as stringent as many would like.
- This goes to show the amount of borrowing that the Fed is doing is unsustainable and is putting upward pressure on mortgage and bond rates.
But, if the Fed is in that sort of a position, don’t expect them to be loaning money more cheaply…..
Tom
Fed Would Be Shut Down If It Were Audited, Expert Says – Markets * US * News * Story – CNBC.com
The Federal Reserve’s balance sheet is so out of whack that the central bank would be shut down if subjected to a conventional audit, Jim Grant, editor of Grant’s Interest Rate Observer, told CNBC.
With $45 billion in capital and $2.1 trillion in assets, the central bank would not withstand the scrutiny normally afforded other institutions, Grant said in a live interview.
“If the Fed examiners were set upon the Fed’s own documents—unlabeled documents—to pass judgment on the Fed’s capacity to survive the difficulties it faces in credit, it would shut this institution down,” he said. “The Fed is undercapitalized in a way that Citicorp is undercapitalized.”
