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Holy . This is a huge bailout gift to the TBTF banks that got us into this .The policy, known as quan ative easing and often abbreviated as QE3, entails buying $40 billion in mortgage-backed securities each month.
Bank stocks should go ing nuts.
NEW YORK (CNNMoney) -- The Federal Reserve announced plans to unleash more stimulus Thursday, in its third attempt at a controversial program to rev up the U.S. economy.
The policy, known as quan ative easing and often abbreviated as QE3, entails buying $40 billion in mortgage-backed securities each month. The end date remains up in the air, as the Fed will re-evaluate the strength of the economy in coming months.
The Fed is wasting no time. The purchases begin Friday and are expected to total about $23 billion over the remainder of September.
In addition, the Fed also indicated that it plans to keep interest rates at "exceptionally low levels" until mid-2015. Previously, the Fed had forecast rates would remain low until late 2014.
The central bank's main objective is to lower interest rates and mortgage rates in particular. By keeping rates low, the Fed hopes to fuel more spending and eventually, more hiring.
The policy "should put downward pressure on longer-term interest rates, support mortgage markets, and help to make broader financial conditions more accommodative," the Fed's official statement said.
Meanwhile, the Fed will continue its existing policy known as Operation Twist. Together the two programs will add $85 billion in long-term bonds to the Fed's balance sheet each month.
Related: QE3 won't create jobs
The Fed has been trying to stimulate the economy for over three years now, and has exhausted its usual tool by keeping interest rates near zero since late 2008. Quan ative easing is an unconventional way of trying to lower rates further.
Still, the Fed is not satisfied, given that the unemployment rate has remained above 8%.
In a speech two weeks ago, Fed Chairman Ben Bernanke called the job market a "grave concern." Later, the government's jobs report showed hiring slowed substantially in August and the labor force shrank.
In its statement Thursday, the Fed indicated it will not only continue QE3, but also "employ its other policy tools" if the "labor market does not improve substantially."
The Fed's accommodative policies have been contentious from the start. Republicans often warn that as the Federal Reserve has expanded the money supply, it has set the economy up for rapid inflation in the future.
Meanwhile, economists expect the benefits to be minor, and the risks are uncertain. The first two rounds of quan ative easing lowered interest rates and fueled stock market gains, but banks haven't been eager to lend out money readily.
Martin Feldstein: What worries me about QE
Banks are sitting on $1.6 trillion in reserves and credit standards remain tight following the financial crisis. Households continue to pay down debt, and are in no hurry to ramp up their spending.
That said, it's possible the Fed's move could help the housing market slightly. New construction and home prices have already started picking up recently, and should mortgage rates fall further, that could fuel a quicker housing recovery.
Holy . This is a huge bailout gift to the TBTF banks that got us into this .The policy, known as quan ative easing and often abbreviated as QE3, entails buying $40 billion in mortgage-backed securities each month.
Bank stocks should go ing nuts.
Yay?
"Households continue to pay down debt"
no, that's over.
http://www.nerdwallet.com/blog/credi...ebt-household/
"set the economy up for rapid inflation in the future"
St Ronnie's Fed guy Volcker showed how to stop that in '80s.
I knew it was a big number but I didn't realize that student loan debt was larger than credit card debt.
Wow... terrible news, tbh.... setting us up for our dollar losing reserve status imho...
Basically the Fed pays 100% face value for crap in bank portfolios that is actually worth pennies on the dollar. WTF? How does this help anyone but the ing banks? suckers still don't make loans. Mother ers then borrow at 0% from the Fed window and buy treasuries with a guaranteed profit spread. . Bernake sucks.
It's not just Bernanke... this shady is exactly how the Fed has operated since it came into existence, tbh.... this is why our Founders warned us against central banking and strictly delegated the coinage of money to Congress....
Actually St. Jimmy's Fed guy.
BofA is up 5% since the anouncement. I'm not sure that this will provide a lasting bump since the fed's actions basically amount to an announcement that the economy and our financial ins utions are in worse shape than most people think.
^^^ that
the biggies were ALL bankrupt end of 2008. and many still are except for taxpayer support.
Was the prime time to nationalize them all and turn banking a non-profit public utility, while removing the risk.
Buying 40 billion of crap every month indefinitely can go a long way towards fixing the banks ed up balance sheets.
Solyndra X 1,000,000,000,000,000
You clearly know nothing about the economy or our government if you think nationalized banks would be anything other than a catastrophic failure, tbh.... between the Fed's non-stop money-printing and the scandal that occurred when the House of Representatives tried to run their own bank, nationalization would CREATE bigger risks than it could ever mitigate....
I swear we'd have been much better off just giving every household $100,000 than doing all this QE crap.
Blah. I'm not a huge fan of derivative sequels, excepting ESB of course.
The scale is substantially smaller than previous instances. As long as there's no inflationary pressure, why not? If it helps prop the economy, then let's do it.
Front loaded QE! I'm in!
I hate the ing banks so much
yep, but the banks are completely immune to hate from their victims.
I thought this would push gold to $1800 but just $1760 so far.
I wonder what will happen when that golden bubble pops?
The bubble already popped. It was over $1900 a year ago then fell down around $1500.
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