Fed Announces It Will Buy $600B In Treasuries

Today the Fed announces it will buy back $600 billion in Treasuries, a nuanced effort that aims to stimulate the economy by lowering interest rates.

The plan relies on reinvesting monies it’s making off all those crummy mortgages it bought into buying back Treasury Bonds. Part of the hoped-for effect is that if lower long term interest rates fall, homeowners will have incentive to refinance into cheaper mortgages.

Fed Will Buy $600 Billion in Debt, Hoping to Spur Growth [NYT]

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  1. BettyCrocker says:

    I don’t think the problem is with homeowners NOT wanting to refinance.

    • qwickone says:

      Exactly, there are so many people trying to refinance right now, good luck trying to get through. My parents have been trying for MONTHS to refinance (they have more than 20% equity, good credit score, etc) and they can NOT get people to process their paper work. They’re been in pre-closing for about 2 months now.

  2. Kat@Work says:

    Ah, nostalgia – had that toy register. :)

  3. CBenji says:

    I guess everyone will need jobs to do that now won’t they, plus good credit, plus it will have to pay to do it, with points and all that crap, like loan origination fees and stuff. How fun. Pretty soon they will have to start paying people to come in and get mortgages.

  4. TuxthePenguin says:

    So sub 4.5% interest rates on 30-year notes isn’t low enough? What is low enough? 3%? 2%?

    I have a feeling that the lack of borrow isn’t due to the “high cost” of the money, but other things… such as entities assuming that their taxes are going to go up on 1/1, so they are trying to accelerate all their income to this year or postpone expenses to next year. Heck, I’ve already worked out “financing” for a few of my clients to pay as little as possible to keep their contracts live, then pay in full (as they would normally do) on 1/3…

  5. obits3 says:

    “The plan relies on reinvesting monies it’s making off all those crummy mortgages it bought into buying back Treasury Bonds.”

    They’re making money? Then why did we need to bailout the banks?

    • grapedog says:

      the money was a float until the bursting bubble calmed down a little. all those banks are still actually, honestly, insolvent. The government is just not requiring them to be honest about their finances. They hold billions of dollars of property that isn’t worth billions of dollars, and some of these banks are leveraged 50:1 and 80:1… So the money was a float until home prices started to rise, but housing prices are not really rising. So everyone is just playing a waiting game.

  6. Loias supports harsher punishments against corporations says:

    Not going to help, imo.

  7. ElleAnn says:

    My parents still have that Fisher Price cash register. I taught my 15 month old nephew how to use it. He’s a smart kiddo- he always puts the coins in the right slots and can give you change. Better than some cashiers I’ve met.

  8. keepher says:

    Mind boggling. No job or underemployed means no increased spending no matter what the interest rate is. All this will do is make the rich, richer.

    • Loias supports harsher punishments against corporations says:

      Actually lower borrowing interest rates for customers means lower borrowing rates for banks as well. That means savings accounts, CDs, bonds, etc. don’t earn you as much in interest. So, the rich get less rich. But the middle class also doesn’t get any richer. And the poor…. generally remain poor.

      • psm321 says:

        Except the rich have “ins” to get into larger investments that earn more (leveraged deals, etc.) whereas middle class investors are stuck with CDs, bonds, etc

      • evnmorlo says:

        The rich aren’t invested in CDs. They are invested in bank stock which have increased profit margins during this “banking crisis”

  9. nova3930 says:

    Devaluing the currency = import prices go up = $10/gallon gasoline

    Who’s ready for the inevitable hardship and demagoguery that brings?

    • Loias supports harsher punishments against corporations says:

      If it causes a massive shift to national energy independence, I am willing to endure a little hardship.

      • TuxthePenguin says:

        We could have real energy independence if we were to build at least a nuclear plant in every state and begin building charging stations for electric cars.

        Then again, that would reduce mobility as you can’t recharge a car as fast as you could refill a ICE…

        • Loias supports harsher punishments against corporations says:

          I’m interested in sustained independence. Nuclear power has some significant drawbacks and can’t sustain us indefinitely. But the sun, wind, and ocean currents are not going anywhere during our existence. If they did, we’d be going with them.

          • TuxthePenguin says:

            I would highly, highly doubt that we would run out of fissile materials any time in the foreseeable future. There are great stride being taken in using Thorium as a fuel source.

            I just say nuclear power because it can be built anywhere and is a reliable, constant source of energy. Once that infrastructure is in place, then we go to solar, wind and tidal power (well, tidal is reliable since we have a moon, but you can’t use that to power, say, Nebraska).

            • Loias supports harsher punishments against corporations says:

              I don’t like the side effects of nuclear power. They are incredibly bad. Near Denver is a literal wasteland, caused by underground nuclear waste that has been stored there. Animals can’t survive there, and is off limits to humans (who obviously also can’t survive there).

              As an interesting sidenote, I listened to an NPR interview of the guy in charge of placing signs warning people of the nuclear danger. The difficult part was for his team to come up with a sign that would properly indicate a dangerous area due to nuclear radiation for civilizations hundreds or even thousands of years from now. Symbols and words that makes sense now might mean something else entirely, or mean nothing at all, in the far future.

              • evnmorlo says:

                Mining for fossil fuels also produce wastelands. And I’m not sure what kind of animal can live in a field of wind turbines or solar panels

              • jnads says:

                There are reactors where that material can be changed into more harmless waste.

                They haven’t really caught on because they’re untested and more expensive.

                Once we run out of [cheap] Uranium, that problem will be solved.

                Currently, all the cheap Uranium isn’t mined. It’s salvaged from nuclear warheads.

                • hansolo247 says:

                  Uranium is cheap and plentiful.

                  There’s no point to mine for new sources as there is literally so much out there right now.

                  And why not use leftover uranium from nuclear weapons? It has already gone through the energy intensive process of isolating high concentrations of U-235. The weapons grade stuff is actually mixed in with U-238 to lower its concentration to use in power plants. The sheer amount of energy contained within a fist-sized rock of weapons-grade material is mind-boggling. It lasts a LONG, LONG, LONG time, too.

                  U-238 isn’t much use in a Uranium reactor, but is bred into Pu-239 for use in other reactor designs (although we don’t really do it in the US). And U-238 is literally everywhere.

          • ShruggingGalt says:

            That’s nice and all, but China controls most of the raw materials necessary to make the devices needed to harvest solar, wind, etc.

            So, we’ll be dependent on them and their incredible environmental controls to extract those resources.

        • Warren - aka The Piddler on the Roof says:

          Unless you have cars with swappable batteries, like the one Renault built.

          http://wot.motortrend.com/6250134/green/renault-debuts-electric-car-prototype-with-swappable-battery/index.html

      • catnapped says:

        Sorry, voters didn’t want that.

        Guess it’s $10 gas for everyone!

        • Loias supports harsher punishments against corporations says:

          I was actually implying that the $10/gal would spark the push for energy independence.

      • evnmorlo says:

        Enjoy riding your bike while those in charge are flying in private jets

  10. OnePumpChump says:

    Oh, great, I always wanted to live in 1990s Japan.

  11. Buckus says:

    I think the already low interest-rates are incentive enough. The problem is that those who wish to re-finance got mortgages in 2005-2008, and now their homes are worth at least 25% less on the average, and no bank is going to refinance them because they don’t have enough equity, even if they put 20% down on the original mortgage.

    Pretty soon they’ll be paying people to refinance, and they still won’t be able to.

    • hansolo247 says:

      The banks are already borrowing at negative rates from the Fed.

      Fed prints money
      Fed loans money to shore up bank balance sheets
      Fed actually pays money for the banks to hold the money.
      Banks buy t-Bonds and make money on money they are already getting paid to borrow.
      Banks make massive profit
      ???
      Obama and Bernacke save everyone!

  12. ill informed says:

    but the republicans took the house, so we’re saved!

  13. ALP5050 says:

    To get to the point, Ben Bernanke is evil or just plain stupid.

  14. Tokarev_Makarov says:

    The toy cash register image is amusing, but I think a cartoon version of the serpent that ate its tail would be more appropriate.

  15. peebozi says:

    I hope this means more free profits for the banks!! Yay, the banks will save us!!

  16. silas says:

    Inflation for All !
    …except savings accounts and cd’s !
    These guys are trying so hard to replicate the Carter years.