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Oud 20 september 2008, 06:59   #10
Paul Nollen
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waar komt het geld van de FED vandaan


Citaat:
Wall Street Journal SEPTEMBER 19, 2008

Behind the Fed Moves, and What’s Next
By JON HILSENRATH

In normal times, the Federal Reserve relies almost exclusively on a single tool: It raises interest rates to slow the economy and thwart inflation or lowers them to speed the economy. These aren’t normal times. The Fed this week didn’t cut the rates it controls, but instead tried other means to unfreeze credit markets. Here is a rundown of what happened, what it means, and what could come next:

What has the Fed done?

Sunday, it expanded lending programs, created during the Bear Stearns collapse in March, aimed at ensuring that investment banks can fund themselves. It said it would accept more risky assets — even equities — as collateral for loans.

Wednesday, the Treasury said it would help the Fed expand its $900 billion balance sheet by $200 billion dollars over a week’s time. Like Citigroup, the central bank has assets and liabilities. The Fed’s assets (Treasury bonds, loans to banks) are financed by liabilities (currency, reserves that banks have on deposit at the Fed.)

To be sure the Fed can expand its lending, the Treasury is depositing fresh cash at the Fed. Like a depositor who walks into Citi with a big check to deposit, the Treasury is selling securities in the markets and leaving the proceeds at the Fed.

Thursday, the Fed moved to provide foreign central banks — which can print euros, yen or pounds, but not dollars — the U.S. dollars they need to meet demand from their commercial banks. The Fed now has agreed to provide up to $247 billion in dollars in exchange for currencies of the British, European and Japanese central banks.

Is the Fed just printing money?

It could, but it isn’t. That would increase the total supply of credit in the economy and lower the price of money, also known as the federal-funds interest rate that the Fed largely controls. The Treasury maneuver doesn’t create new credit. Rather the Treasury has sucked up cash in the economy and deposited it at the Fed to be redeployed elsewhere, namely struggling financial institutions.

Is the Fed running out of ammo?

It was. The Fed entered the crisis with nearly $800 billion of U.S Treasury securities, and more than half of that has been exchanged for riskier securities, lent to banks or investment houses or otherwise committed. The Treasury maneuver was crafted to give the Fed more resources to put to work in the market should the need arise.

What’s next?

Commercial banks currently get no interest on the reserves they are required to hold at the Fed. If the Fed paid interest on reserves, banks would be willing to store more money there, and that would give the Fed more maneuvering room to lubricate the financial system without lowering interest rates.

Congress, at the Fed’s request, has agreed to change that — but not until 2011. The Fed wants to do it sooner, and Congress is moving to change the law accordingly. There is a rub. The Fed turns its profits over to the U.S. Treasury. Paying interest on reserves would reduce those profits by about $1.4 billion over five years.

Why doesn’t the Fed just cut interest rates?

It may yet. With its key interest rate at 2%, the Fed has room to go lower. That would lower borrowing costs for businesses and consumers and offset the credit crunch.

The Fed has been reluctant in part because of worries that inflation might be worsening, and in part because it wasn’t certain the interest-rate medicine would treat the current disease. But if the credit crunch continues to intensify or the economy deteriorates, the Fed could move swiftly to cut rates.

Write to Jon Hilsenrath at [email protected]
Copyright 2008 Dow Jones & Company, Inc. All Rights Reserved

Paul
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