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Originally Posted by Guest
I must have graduated with an MBA and a BA from institutions led by professors whose education and experience was outside far outside of the instructors you were taught by .
Also my 35 years in the banking and finance industries must have been at institutions which operated in some type of alternative business universe than your career was spent in .
" Feds don`t give money to banks so they can buy stocks ". Feds don`t " give " money to banks period ! Just not enough room for me to try to begin to explain how incorrrect you are on this one .
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Well I don't know what you did or where you went to school but...
Federal Reserve Raises Rates on Reserves: Why It'''s Giving Away Money | Fortune.com
The Fed is PAYING the banks now...
"But after the Fed has spent years buying up government debt of various maturities as well as mortgage-backed securities in order to drive down long-term interest rates, the banking system is awash with a huge number of excess reserves. To drain those reserves, the Fed would have to sell a good portion of those bonds. That would likely drive up interest rates—particularly long-term and mortgage rates—higher than the Fed would like. So instead of draining the reserves, the Fed has decided to pay a higher interest rate on those deposits."
The Fed Raises Rates...By Paying the Banks | Common Dreams
"As a result of its quantitative easing programs, the Fed dramatically expanded its holding of assets. At the end of 2008, it owned less than half a trillion dollars in Treasury securities and no mortgage-backed securities. By November 2015, it held $2.5 trillion in Treasuries and $1.8 trillion in mortgage-backed securities. Because buying all these securities meant that the Fed’s checks became reserves for the banks, and because the banks were paid for keeping these reserves with the Fed, excess reserves ballooned to $2.5 trillion."
"It seems that the Fed has backed itself into a corner, where the only way to raise the federal funds rate is to increase its payments to financial institutions. With reserves held at the Fed equal to $2.6 trillion"
The "effective funds rate" is currently zero...the Fed is GIVING the banks money.
Things have changed since you were in banking...
Are Banks Borrowing from the Fed at Low Interest and Making Money Buying U.S. Treasuries? | PBS NewsHour
"BY Murrey Jacobson May 20, 2010 at 10:14 AM EST
Question: I read recently that the “big banks” are borrowing from the Fed at 0.1 percent and buying U.S. Treasuries with the borrowed funds, thereby collecting around 3 percent. Can this possibly be true?"
It's effectively free money from the Fed.
what is POMO federal reserve - Google Search
"DEFINITION of 'Permanent Open Market Operations - POMO' When the Federal Reserve buys or sells securities outright in order to permanently add or drain the reserves available to the U.S. banking system."
Urban Dictionary: POMO
Top Definition
POMO
Short for Permanent Open Market Operations.
The mechanism by which the Federal Reserve manipulates the stock market.
It is no secret that the Federal Reserve, and its now semi-daily interventions in market liquidity via POMO, is rather hell bent on creating the illusion that the economy is alive and well courtesy of a ramping stock market.
Do you want more? Or have I made my point?