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srsd

Fed Gives $20B to Banks in Credit Crisis

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Dec 19, 12:28 PM (ET)

By JEANNINE AVERSA

WASHINGTON (AP) - The Federal Reserve is providing $20 billion in loans to banks as part of an unprecedented auction process to ease a global credit crisis and make sure financial institutions can keep lending to their customers.

The central bank on Wednesday announced banks' use of a new auction facility that was created to encourage banks to seek cash directly from the Fed to help them overcome credit problems.

The Fed announced that the interest rate on the short-term loans will be 4.65 percent, which is slightly less than the 4.75 percent the Fed charges banks on emergency loans through its "discount" window. Banks have been reluctant to use the Fed's discount window because of the fear that investors will believe they are having trouble getting funds in a normal manner.

The Fed received bids from banks for $61.6 billion worth of loans, an indication that the Fed was able to encourage banks to use the new auction facility.

In its announcement of the auction results, there were 93 bids for the loans. Each bank could submit up to two bids. The auction for the 28-day loans was conducted on Monday, and the results released on Wednesday.

Asked how the first auction fared, T.J. Marta, a fixed-income strategist at RBC Capital Markets, replied: "I was standing next to two seasoned traders and one thought this auction was fantastic and another one thought it was horrible."

For his own part, Marta said it was "unsatisfying" because investors had thought the rate on the loans would have been lower, around 4.30 percent or 4.40 percent, rather than 4.65 percent.

"There was a hope that things really weren't that bad and that the market would have been able to bid down the Fed and take the money at a cheaper rate," Marta explained. "The fact that the market wasn't really willing to, was evidence of the stress."

A second auction will be conducted on Thursday, offering banks another chance to get a slice of another $20 billion in 35-day loans. The Fed said it would conduct two more auctions in January and then assess whether the process was worth continuing.

The Fed announced last week that it was creating an auction facility that would give cash-strapped banks a new way to get short-term loans from the central bank to help them over the credit hump. A global credit crisis has made banks reluctant to lend to each other, which can crimp lending to individuals and businesses.

The smooth flow of credit is the econony's life blood. It permits people to finance big-ticket purchases, such as homes and cars, and helps businesses to expand their operations and hire workers.

The Fed's actions are part of a global response in which other central banks also are taking steps to curb the credit crisis.

The European Central Bank on Tuesday opened its credit tap wide, pumping a record amount of cash - more than $500 billion - into markets to keep banks from Finland to France flush with the cash they need to operate.

The move, along with another liquidity infusion by the Bank of England, was aimed at keeping jittery markets calm amid a credit squeeze. It appeared to calm stock markets.

In the United States, the Fed also has been slicing its most important interest rate, called the federal funds rate, to help deal with the tight credit situation. The Fed has lowered this rate three times this year. Its most recent rate cut on Dec. 11 dropped the rate down to 4.25, a two-year low. The funds rate is the rate banks charge each other on overnight loans. It affects a wide range of interest rates charged to people and businesses, making it the Fed's main tool for influencing U.S. economic activity.

The credit problems and a severe housing slump are raising the odds that the country could fall into a recession. Financial companies have taken multibillion-dollar hits because of bad mortgage loans. Home foreclosures have hit record highs. Wall Street has been badly shaken. The Bush Administration and the Democrat-controlled Congress have been scrambling to limit the fallout.

 

 

I think it is too late and the recession will hit..and hit harder than anything that we have seen..

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On the Net:

Federal Reserve: http://www.federalreserve.gov/

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Not God, Jesus or Buddha
Auctioning money to keep lending going. That's a plan for a moron to get behind!

Why not auction toilet paper? At least it is useful at times especially when the "smooth flow" is not quite so smooth.

The banks cannot lend because they are insolvent. They were allowed to lend above even the paltry amount of fractional reserves that they should have held. They were greedy beyond all reason and, like any consumer who overspends, they now find themselves backed against the wall facing their own greed monster.

Unlike consumers, they do not file bankruptcy and vow to do better. Instead they bawl to the Fed to bail them out and then have the balls to bi*ch about the interest rate. Oh, boo hoo.

Every interest rate cut by the Fed costs everybody by cranking up inflation. Every new dollar costs everybody. Soon the Fed will have rates cut to zero and it still won't be low enough to suit banks and investors. The value of the currency is plummeting....soon the banks will demand that the Fed purchase Euros to "lend" to them. More smoke and mirrors for the rabble to examine so that people don't just rise up and scream for the end of the mess once and for all.

The banks are broke. The Fed is broke. America is broke. You know who did it and it wasn't the average American. It was the money manipulators; they broke it and now don't know how to fix it. We will all suffer for it. Get used to it. Your standard of living will be dropping to a new low very soon.


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GOD...........

HOW LOW CAN YOU GO ?....................................
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That's outrageous recover the the stolen money and give the people back their homes.

All I hear from the politicians is medical care, education, and housing. What would we need them to give us any of those things for if they were not driving our jobs overseas and letting the lenders steal our homes.The government is offering so many goodies to offset their destruction and looting of our economy I would not be surprised to hear them offer us a maid, limo and Lear jet service. If they were not stealing our money we would not need any help.

They are allowing the economy to tank so they can provide for our personal needs and we are too dependent to say anything about it.

They want us to lose our homes so they can rent them back out to us it's really that simple.

They can stop lying now we already know 85-90% of the people hate the government and we know they know.

Arnold Schwarzenegger's plan to end the fiscal crises caused by stealing homes is to provide universal health care for the illegal immigrants.He claims there are 1 million illegal immigrants out of 36 million in California that's pure bull there are so many it's literally hard to walk down the sidewalk or shop in stores. In Sears for example in a big mall here they use only Spanish over the P.A. for customers.

In an L.A. suburb they got rid of the police because they said so many of the vehicles were unlicensed and uninsured that the town would be out of work if the residents had to follow the laws.

The message seems clear don't worry about the economy crashing or your home being stolen we'll just install a socialist/fascist government and take care of everything for you.

If we don't stand up for property rights and the rule of law we will wind up living like they do in China, India, Cuba and other nations where the people have no rights and no wealth.




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Unless Im mistaken, did this same problem occure shortly before the "Great Depression"? 

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srsd
What I can`t understand is that they will give them 20 BILLION dollars after they have taken....let me rephrase that.....stolen peoples houses.....put our economy in jeopardy of a total collapse, open the USA up for a full blown attack by other countries by our economy collapsing, and yet not help the individuals that are hard working honest people.

Gary, I think you are right about the remark about the great depression....
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Yes Gary very similar but on a much much larger scale and with much higher debt ratios.

Here is Allen Greenspan's explanation in relation  to  the  Federal reserve transferring U.S. assets to England to artificially support socialism in England.

"             the Federal Reserves attempt to assist Great Britain who had been losing gold to us because the Bank of England refused to allow interest rates to rise when market forces dictated...the Fed pumped excessive paper reserves into American banks...to stop Britain's gold loss and avoid the political embarrassment.The Fed succeeded:
it stopped the gold loss, but it nearly destroyed the economies of the world.
The excess credit which the Fed pumped into the economy spilled over into the stock market-triggering a fantastic  speculative boom." he's long winded so I'll summarize the contraction to control the boom caused a loss in business confidence and the American economy collapsed which set up a global chain reaction.

We have had much the same policy with artificially supporting socialist/communist governments all over the world with Fed/IRS policy but in addition IMF/World bank policies with favor supporting socialist/communist countries which is funded largely by the U.S. and U.N. membership.

The problem is even far worse due to the money laundering transferring our assets backed by mortgages out of the country and the heavy investment of foreign countries to support our debt based economy and further transfer U.S. assets to foreign interests.

We need to stop artificially supporting countries all over the world and let them make it on there own, if they were not artificially propped up though government aid their economies would become sufficient and populations would become sustainable.

The end result is that government aid to the poor causes selective population increase of poor and decrease in middle and upper middle class.
This is great for the lenders because they can trap large populations of poor and dependent people in permanent debt which is extremely profitable and boosts needs
for outside supply of resources such as agriculture, energy, infrastructure, food, medical supplies etc.

The lenders of course make out big dismantling U.S. production, and services and rebuilding these businesses overseas, as well as of course the infrastructure, power plants, mines, roads, bridges, schools etc.

Of course this could not occur without politicians worldwide conning people into believing the government was "compassionate", "fighting for social justice" and "helping the less fortunate".

If people would just say thanks but no thanks to the wolf running the hen house at maximum production we would all be better of and have sustainable economies and populations.

That why the original and perhaps only true peoples politicians Thomas Jefferson and Andrew Jackson fought to hard to eliminate debt, paper money and taxes because they are the friend of the super rich and enemy of the common man.



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