Fed considers QE 2.0

This explains why the dollar dropped so much yesterday.

(Reuters) - The Federal Reserve is discussing re-entering the mortgage-backed securities market later this year if its buying power is needed to hold down interest rates, Market News said on Tuesday in a story citing Fed officials.
The $5 trillion agency mortgage-backed securities market may weaken when last year's biggest buyer, the Federal Reserve, ends its $1.25 trillion agency MBS purchasing program at the end of the first quarter of 2010.
Fed officials, however, "are prepared to contemplate changes if need be, depending on conditions in the economy, housing finance and in financial markets more broadly," Market News said in a story written by Steven Beckner.
"Among the options that has been discussed, say people in a position to know, is doing additional MBS purchases."

The significance of this development is many-layered.
1) It means the private ABS market is still broken.
2) It means that the Fed's plan for soaking up the excess liquidity in the market is on hold for this year.
3) It means that interest rate hikes are also on hold for this year.
4) It means that the dollar is going to fall some more.

At some point the people in charge are going to have to realize that monetary and fiscal stimulus are not solutions for chronic problems in the economy. In fact, they only make them worse.

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The type of 'monetary' and fiscal stimulus coming out

of Washington are not the solution. Propping up the mortgage market is not the way to do it. Not targeting full employment with fiscal stimulus is not the way to do it.

Politics is dictating that this crisis be 'kicked down the line'. I agree with #1 above - ABS market is still in trouble. But we are repeating the problems but this time with one new player - FHA.

RebelCapitalist.com - Financial Information for the Rest of Us.

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ABS market

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this graph is a picture worth a thousand words

then they have got to be kidding me on restarting buying more of this toxic waste. Great catch midtowng!

We have Fannie/Freddie not only getting "unlimited" bail out but now we have the supposed "justification" for it being "removed" to do even more toxic securities buying.

This is just unreal and I would like, at this point, to know what specifically each one of these "ABS" types are and what is the chance of them having any real value?

I'll bet zero so is this just anything Zombie bank funnel?

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Government "manipulating" stock market

Anybody else see this? they claim the government caused stocks to rise in 2009.

For anyone loving a good CT, go for it, myself I have plenty of reality by TARP, PPIP, ABS purchases and derivatives to keep my plate full for while. ;)

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