TNX has gone from 34.95 to 38.86 in a week. Ben is failing miserably. He will do whatever it takes to defend his name and our politicians are to ****ing scared to call it.

Point taken Gen. If the Fed. Reserve Act specifically prohibits an action and the Fed subsequently engages in that action then somebody has to answer. That person would have to be BB. Changing the name to QE doesn't help.

My question is this: under the Fed. Reserve Act can it not purchase treasuries? Does the "Act" require them to be purchased in the open market? If so, colluding with PDs to circumvent that requirement would be illegal.

For God's sake, why don't these people just ask Congress to amend the act to permit them to do these things - even if temporarily. (Answer: because once they ask for that they have opened Pandora's Box and the Fed Reserve does not want Congress monkeying with its business.)

A comment posted by Brian on "Across the Curve" last night, the author of the financial sense article. Is good and clear.

"The point was what I originally wrote about in the Financial Sense piece on Tuesday 8/4 … http://financialsense.com/fsu/editorials.... … well before Chris Martenson’s story surfaced. It is not that the Fed has been purchasing treasury debt since 3/25. Of course it has … it said it would … and it said it would purchase long term treasury debt.

The point is that it has gotten to the point where the Fed is essentially lending directly to the Treasury … which is explicitly disallowed by the Federal Reserve Act (I corrected Martenson in his blog on this point). The Fed can only purchase securities at auction that are maturing in its SOMA portfolio. This is reported in the “SOMA” line of the Treasury Auction Results report. But when the Treasury can auction large amounts of debt and have the Fed support that auction by purchasing some of those same securities on the day of issuance, this in my opinion is violating the aforementioned section of the Federal Reserve Act. Not only that, it is more expensive for the taxpayer as there are middlemen involved (earning fees and commissions) … the primary dealers."

I'd like to see the part of the Federal Reserve Act which limits treasury purchases at auction to only those "maturing in its SOMA portfolio." I don't think the Act is that specific as that seems more like a policy decision.

Check out the "Bold" below. This is from the Fed's website. Isn't this an admission of monetization?

http://www.newyorkfed.org/markets/pomo_f....

Quote:

How long will the program be in place?
Purchases of up to $300 billion in longer-dated Treasury securities will be made over the next six months.

Has the Federal Reserve changed its 35 percent per issue limit in light of this program announcement?
No, the System Open Market Account’s current per issue limit for Treasury holdings remains at 35 percent. The Desk will reevaluate this decision as needed.

Will the Federal Reserve lend the Treasury securities it purchases through this program?
Yes, Treasury securities purchased through this program will be available to borrow through SOMA’s securities lending facility.

Will these operations be reserve neutral?
No, these operations will be financed through the creation of additional bank reserves.

Of course they have been doing this for months. It all started about the same time the equities and commodities started to rally and their bank friends were able to issue more worthless debt. This was the plan all along and I give them credit for pulling it off and nobody really seems to care. Many of us including KD, Adler and others have been following this action watching the Fed programs. The assumption of all the garbage from Treasury, FNM, FRE is a very expensive circle jerk (to quote Adler)

Whether this is illegal and a huge constitutional problem is another matter.

Ignore the massive weekly treasury debt issuance
Ignore how primary dealer auction results are now disclosed
Ignore past Bernanke lies
Ignore previous day's 5 yr auction fail
Ignore the foreign appetite for debt is all but gone
Ignore the lack of overall Fed Reserve transparancy
Ignore the fact that the Fed has broken the law before
Ignore the fact that they are pigmen bankers.

...and everything is OK.

From The King Report
By Bill King
M. Ramsey King Securities, Burr Ridge, Illinois
Friday, August 7, 2009

http://www.thekingreport.com

... The Fed monetized $14.2 billion of mostly five- and seven-year bonds in the past two days. But [Federal Reserve Chairman Ben] Bernanke continues to gradually shrink the Fed's balance sheet. It fell $11.319 billion for the week ended on Wednesday due to an $11.467 billion decline in "central bank liquidity swaps." (Dollar swaps aren't needed now.)

http://www.federalreserve.gov/releases/h....

The Fed's scheme, per its behavior, is to monetize mortgage-backed securities, U.S. debt, and agency debt while allowing some credit facilities to naturally whither. Perhaps the Fed is marshalling resources because it expects further government-sponsored entity woes:

http://www.newyorkfed.org/markets/pomo/d....

Several bloggers are screaming that the Fed monetized half of the $28 billion seven-year auction. This is totally false. The Fed monetized $6.43 billion of 7s on Thursday and $6.3 billion of 5s on Wednesday. The five-year auction was $39 billion. The above New York Fed link is crystal clear on what the Fed monetized this week.

No, several bloggers are screaming that The Fed monetized half of what The Primary Dealers took down in that 7 year auction, and that is, in fact, what happened.

BTW, mixed feelings on the King Report. They blatantly plagiarize stuff I've seen people say in TF threads without attribution. OTOH I like that TF stuff is getting into the wall street community.

If the Fed buys treasuries from the public it is monetizing debt by definition. If it buys them from PDs isn't the effect the same? (printing money)

This article was written in Sept. 2005. It is somewhat prescient.

http://economistsview.typepad.com/econom....

Quote:

During WWII The Fed bought Treasuries even though there was no specific power in The Federal Reserve Act allowing it to do so, as a means of "stabilizing" interest rates. This was justified as a war-time measure, and "ex-post-facto" legitimated.

Well then, the obvious conclusion here is that we are in World War III now (or soon to be).

"Ignore the massive weekly treasury debt issuance
Ignore how primary dealer auction results are now disclosed
Ignore past Bernanke lies
Ignore previous day's 5 yr auction fail
Ignore the foreign appetite for debt is all but gone
Ignore the lack of overall Fed Reserve transparancy
Ignore the fact that the Fed has broken the law before
Ignore the fact that they are pigmen bankers.

...and everything is OK." Blackswan

aka "Nothing to see here folks, move along." What a crock.


"Several bloggers are screaming ..."

No bloggers are screaming, bud. Seriously.


Paraphrase Machine: "Outrage is inappropriate at this time. Cease and desist." Endplayer
has been rendered by Para Machine as "Sleep on, little children, trust in guv. Ask not questions that disturb Us."


"I consider QE based on bogus collateral to be monetizing and that's been going on for years, since the Fed first accepted MBS as collateral." Bozonian

"During WWII The Fed bought Treasuries even though there was no specific power in The Federal Reserve Act allowing it to do so, as a means of "stabilizing" interest rates. This was justified as a war-time measure,"

Fraud products foisted upon taxpayers as war-time measures, yet 'why the outrage' and 'Nothing to be seen, move on.', is it?
Christ, today they're coming out of the woodwork and practically proclaiming a war on taxpayers.

This reminded of the infamous "is" as well. Perhaps one day this time period will be referred to as the era of BS.

"One tool that is already being used by the Fed to help support the economy is its purchases of mortgage-backed securities (MBS), which it has already spent over $500 billion in purchases year-to-date."

http://www.financialsense.com/Market/cpu....

"The USD may be the sacrificial lamb ..."

Karl, where are all the Fed apologists? They infested last night's Ticker on this subject.

I think they've shown their hand here.

It would be interesting to know exactly what PD the repurchase was made from.

This might have been specifically engineered to take the Treasuries from a Particular PD in order to pump profit into that Bank while leaving Others to hold.

Of course the PD granted the sale would have Billions in Liquidity restored to it to make Other Purchases whether Treasuries or Equities or Commodities.

Maybe Whomever had for-knowledge of the impending GSE Equities ramps wanted to make a multi-billion Dollar play on that knowledge with a few Billion more than the competitors in the Marketplace...

You have linked to John Jansen's response over at Across the Curve and incorrectly attributed his comments to Lee Adler.

Quote:

You have linked to John Jansen's response over at Across the Curve and incorrectly attributed his comments to Lee Adler.

Certain Bloggers need to slow down with the flash reactions just because a Tyler Durden takes a single data point and converts it into conspiracy central. I for one would feel more comfortable by seeing more vetting done before issues this important get plastered with the connotation of being 100% fact-based. This sort of 'scoop journalism' chain reaction does the blogosphere very little good - especially when it's obvious the ZH originator doesn't truly understand what the hell he's talking about and then goes on to apparently change his original script to match the correction pointed out by someone else. That's BS if indeed that happened - which until I hear otherwise from ZH making the retraction I will take as being accurate.

Btw, Denninger makes the salient point that monetization of debt is still at the crux of the matter. It would be nice if Bernanke could clarify what he means 'is' is in this context. OTOH, maybe too much 'clarity' here could cause more problems than we are capable of absorbing without putting the U.S. financial system at dire risk of collapse at this juncture. I'll take fudging on the semantics over that any day.

http://www.butthenwhat.com/?p=5858

.......

"Vett first, blog later." Hiho

Hihoherewego:

Quote:

". . . maybe too much 'clarity' here could cause more problems than we are capable of absorbing without putting the U.S. financial system at dire risk of collapse at this juncture. I'll take fudging on the semantics over that any day."

I find this point of view quite problematic. Obviously crashing the system we live in is not a particularly desirable outcome. Yet the statement clearly demonstrates the problem we find ourselves in, i.e., TPTB are smarter than anyone else and should be able to lie to us for our own protection and benefit.

Awfully slippery slope there. If that POV is allowed to drive our system of government, we are no longer the USofA, but merely just another banana republic whose "leadership" calls all the shots and the rest of us are just sheep to be herded by our betters.

Granted, we are probably already closer to that point than to the ideals expressed in our founding documents, but I completely disagree with the implication in the statement that we must be shielded from the truth for our protection. "Big Brother knows what's best for you" should not be the basis of government policies.

Quote:

I find this point of view quite problematic.

Trust me so do I. I don't want Mad Max. Few really do when they truly think about what that means. What I'm saying is that at this 'juncture' it may not be the best timing to get it all out in the open all at once whether one trusts TPTB or not. There are those I grant you that say, "Damn the torpedos, full speed ahead'. Ahead to what, exactly?

What can we handle today and not destroy societal fabric to save certain threads?

That's what this all boils down to. An awfully slippery slope indeed to go down and still retain constitutional freedom.

................

Liberty isn't free.

"... maybe too much 'clarity' here could cause more problems than we are capable of absorbing without putting the U.S. financial system at dire risk of collapse at this juncture. I'll take fudging on the semantics over that any day." Hiho

These are the kind of statements that really blow my mind.

Consider: doesn't Bernanke's behavior, Geithner's, and even Paulson's tell you that the system has already collapsed? If so, they really want to know how much appetite for BS you'll put up with, and fudging on semantics is part and parcel.

Some want to be deluded rather than seeking foundations of a new order?

Libery's not free, is it, Hiho?

What if Mad Max is not free, and an aversion to clarity is the price for it?

The argument is much like the argument made by the Papacy during the middle ages. Only priests are learned enough to explain scripture so don't put bibles in the hands of the masses.

Our economy has become a very complex engine with a lot of moving parts. But there is no evidence that telling people the entire truth without revision will hasten the end.

As to whether the system has already collapsed I don't know. All I know is my ATM card still works, there is food on the grocery shelves and I still go to work every day and get a paycheck.

If lies are holding it together and the truth will pull the rug out I don't know which I would choose. I suppose the latter but for the fact that I have a 15 year old and 12 year old.

I understand your concerns, PSquared.

The impression I get from Geithner/Bernanke is that all the fundamentals of a sound economy are lacking domestically. They act as if expectations of a fix-it are viewed by they as understandable but they're trying to tell people between the lines that the country is not as we conceive of it anymore.

Results of the pirates are cumulative, the looting is nearly complete, and hoarders of booty are the rule of the day. And the hoarders are unsympathetic, and that is who they now represent: the hoarders.

The hoarders have their anti-protectionist squads at the ready.

Geithner/Bernanke will serve their real masters in promotion of globalization.