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Fed's Prompt Agency Monetization Makes Headline News
The story first presented on Zero Hedge yesterday as "The Fed's 30's Minute Agency Monetization Window" is now mainstream, after making headline news on Bloomberg.
Oct. 9 (Bloomberg) -- The Federal Reserve bought $170
million of two-year notes sold yesterday by Fannie Mae, the
quickest purchase after issuance of benchmark bonds from the
company or similar institutions since the central bank began
acquiring so-called agency debt.
The purchase was part of $2.6 billion of buying today, the
New York Fed said on its Web site. The central bank listed the
notes among ones it would accept bids for yesterday, about 90
minutes after Washington-based Fannie Mae announced the results
of its $5 billion sale in a statement.
The Fed last month said it would begin buying “on-the-
run” agency debt, or the most recently issued notes in
different maturities. It has purchased $136.3 billion of Fannie
Mae, Freddie Mac or Federal Home Loan Bank bonds since December,
according to data complied by Bloomberg.
The $200 billion program was extended to March 31, from
yearend, by the central bank last month. David Giradin, a
spokesman for the New York Fed, didn’t immediately return a
telephone message seeking additional comment.
We hope that as Bloomberg and other MSM conduits disseminate this and other relevant stories, that more and more people become familiar with the behind the scenes machinations that the Fed is doing, all in its single-minded pursuit of gobbling ever greater amounts of the securities it prints, all with the hidden agenda of destroying any residual value the US currency may have as any confidence that the dollar may be worth anything is promptly refuted by the most recent wave of dollar bills printed by the Chairman.
PS. It appears our observations riled up another bond expert, Accrued Interest (correction - not Accross the Curve, although John Jensen was pretty peeved when we discussed Fed Monetization on August 6, in his post: Monetizing the Debt - Disinformation in the Blogosphere) who claims that this is, as usual, nothing out of the ordinary, and also claims that he does not read Zero Hedge yet devotes numerous paragraphs to refuting just that. For his commentary see here: http://accruedint.blogspot.com/2009/10/ben-bernanke-only-you-could-be-so-bold.html
And for another commentary on the matter, here is Karl Denninger from earlier today.
h/t Mark Pittman and Jim Bianco
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Bout time they picked up on the story! Nice job TD.
No failed banks today? What gives?
Like the discontinued M3 money supply the failed bank list has been discontinued because it was no longer important. Nothing to see here, move along.
It's getting later and later into the weekend before those are being reported. I think they have to find all the ones that need to shut down and make decisions on who stays open and who gets help now. Probably won't hear what banks are failed till sunday.
The FDIC needs money to close a bank. Wouldn't be surprised if they didn't close another bank all year...
Props, Tyler (watch them now switch to 48 minutes).
Im telling you Tyler, they just copy/paste the ever awesome work you do and put it on their site. The old media is dead, but it is good to see, some are here to take over and re-define INFORMATION.
Yep, and I think that the word is beginning to get out where to find the real breaking news... before it becomes day-old news on Bloomberg...
you're right Minnesota. Oh,and on a side note; think there will be Radio ZH tonight; it would be fun to chat endlessly about various topics, while listening to the kick ass tunes.
Can't be there tonight... but the thread you and GG ran today on Kim's commentary was really interesting... like to follow up on that sometime...
So very true, the old media is indeed dead....and they know it.
Can't trust a word they say and they don't say much....that us zerohedgers don't already know!!
ZH, dare I call you razor cutting edge?
A new meaning for "on the run".... bet the ink didn't even dry.
Come on. In the interest of fairness. Here is a refutation of the article by an experienced bond trader:
http://accruedint.blogspot.com/2009/10/ben-bernanke-only-you-could-be-so...
Thanks, TD.
This is about the only news I read now. Is Tyler actually a room full of investigators and out of work journalists and traders working around the clock or does he just have the best espresso maker on earth? Extremely impressive TD, even though I only understand 70% of what you write and I have a PhD in Engineering.
Though I find the notion of a secret A-Team of investigative news highly amusing (and desirable) my intution tells me it might just be one guy with one of those fancy, swiss, grind the beans fresh Espresso machines...
http://www.amazon.com/Jura-Capresso-13179-Impressa-Automatic-Coffee/dp/B0001FQU94/ref=sr_1_7?ie=UTF8&s=kitchen&qid=1255117365&sr=1-7
Just goes to show some of the powers that be are watching you TD.
Next comes the dirt digging and lies to discredit you, gl.
Glenn Beck will be reporting it next.... :eek:
Great Job ZH !
Friggin' conspiracy theorist you! Undoubtedly two months from now NY Mag will have an expose on the above practice extensively quoting Jim Cramer.
Meantime, Skynet trying to get Hal to break out the S&P's on no volume, despite a stronger dollar.
speaking of no volume, is today going to end up being the lowest volume day of 2009? it seems to be looking that way.
Dunno, it could be. It's like Christmas holiday trading. One thing is for sure, it won't be like this next Friday.
ZH is the new Bloomberg.
Jody Shenn is one of the few MSM reporters who understands the mortgage market. I hope he does read this site, if we could get more mortgage market stories here we could get closer to the true corruption in our society.
Ghost,
I agree...but when everyone is making money hands over fist...no one gives a shit. Wait till everyone (except the banks) starts losing money than we may get some traction.
Bruce Krasting who post here and on his own blog has outstanding mortgage market analysis.
by the way, I like to be redundant...FHA WILL implode...just after the mid term elections.
The new economy will no longer support the bloated msm.
Has GE put in an offer for this blog yet? If not, my people will contact you're people:)
nice going TD...keep at 'em.
I would love to see some legal opinions about the validity of the Fed purchasing non US gov't backed securities. Denninger constantly goes on about it and it appears to my reading that Karl is correct.
TD and others...can we get some attorney opinions on this please? Thank you.
KD is right, it is illegal.
Just like FNMA refinancing 125LTV loans is illegal.
Nobody gives a f*ck.
Which is why I own gold.
Under what authority is the Fed buying these securities? They have no authority to buy securities that are not backed by the full faith and credit of the US government.
Not to be totally facicious about this, but they may be invoking the "exigent circumstances" clause. As in, purchasing newly issued agnecy securities is an illegal activity, but such instruments may be purchsed by the Fed in "exigent circumstances".
assetman...thanks....you are probably correct.
thank you
TD....a legal analysis of this subject has not been promoted by anyone, save KD. How about a ripping expose of this matter? thank you.
I would help but I simply do not have the securities law, etc. experience nor do i have a license to practice law.
And I see Alcoa that was used for a big spike in futures and bought by big volume pre announcement is now being sold off and those that were in the know before hand no doubt unloading onto the bigger fool who bought into the overhyped news
And AA is now below its announcement price. The market? Markedly higher, on (AA earnings? no, weaker dollar? no, stronger dollar? no, consumer credit expansion? no, business spending? no... must be hopium).
Not even a hat tip for Zero Hedge from the Bloomberg hack:
« To contact the reporter on this story: Jody Shenn in New York at jshenn@bloomberg.net »
Ha! 'reporter', pretending to be a hard-working journalist while just 'reporting' what she surfed and saw on Zero Hedge.
Soon, expect ZH to be targeted by the PTB ... some kind of legal trouble or extortion from the utterly crooked US legal system ... like the way they went after Aaron Krowne with his 'Mr Mortgage's Guide to the Truth', or after Mike Morgan with his Goldman666 site ...
They've allowed ZH to continue because they learn from it ... soon the PTB will have had enough and will move to terrify it and at least de-fang it.
ZH's key people might consider moving assets over the US border, updating their passports and having an escape plan.
That's what's so funny about the msm wanting to charge bloggers for their content, because they are the ones ripping us off!
TD may feel otherwise, but I'm just glad that someone... anyone... at Bloomberg is willing to put out the story a day late or so. I don't see too many of the other MSM outlets giving much attention at all to this... yet.
TD and the gang likely have some of their assets where the buffalo roam in eastern europe.
Cheers,
Pigpen
I feel twisted about this. I want to say congrats, yet again, for getting through the thick veil of obfuscation that surrounds the US public, via getting through to the mainstream media. But by looking to get your info into the mainstream, you support them. What I am saying is that by counting your successes in terms of them featuring your finds, you reify them into existence and empower them during the times they are wrong and/or blatantly corrupt.
It is too important to get the word out, any way you can, to quibble over details like these. But there will come a time that you will need to stop looking to them for validation and fatherly approval. There will come a time where you need to move on. Just sayin'. But that time is not today, so....
Score! Hoooah!
especially when you shun one of your original godfathers:
Martin Armstrong
New Yorker article on MA that mentions ZH:
http://www.scribd.com/doc/20800127/The-New-Yorker-article
MA mentions ZH in his latest joint from the joint:
http://www.scribd.com/doc/20759808/Conspiracy-Theories-Cloaking-Reality-...
but i guess it's appropriate to shun felons when you wanna kiss up to billionaires.
1) QE is a very very new development, so while Mr. Jansen has great experience in bond markets, no one can say what "normal" QE looks like
2) Focus on the degree of any conspiracy alleged by ZH. No one would claim that a meeting of cackling banksters in a smoke filled room led to this particular purchase. It is much more about overlapping self-interests for perpetuating a corrupt system.
3) Even if every aspect of this bond purchase were "normal" the broader point that gets lost in this sniping is that QE sets up situations like this that as Jansen concedes puts us within a few meters of monetization. Does anyone have the stones to stand in front of a security guard all day pretending to stuff things in their jacket? Then why do we want to continue these actions that look like monetization to our creditors?
Jansen doesn't know a fucking thing about the MBS or agency markets. he worked at the Fed, before they decided it WASN'T illegal to buy agency paper.
So very true ghost. Most likely why he got the call to take this up.
Aren't Accrued Interest and Across the curve two different bloggers?
see what happens when you let the lunatics hyperventilate......
anybody want to hazard a guess on whether an odd lot purchase will drive the SPX to close at year highs?
Barack Obama won the Cy Young award!
Mr. Slick... the Nobel Peace Prize.
Let us see...
For a year solid while campaigning against Hillary, Mr. Change said every f*cking day, Hillary voted for the Iraq war, Mr. Change didn't.
Mr. Change said it SO MUCH damn if I did not think he was the second coming of '64 LBJ the "Peace Candidate."
So he must have one the Nobel Prize for that.
Because once in office Mr. Slick:
1. Did not pull out of the Iraq war, just pulled a bait and switch and left warfare troops in place.
2. Escalated the war in Afghanistan into a civilian shooting gallery.
3. Launched numerous remote missile drone attacks against Pakistani civilians
and now...
4 Mr. Slick is threatening Iran...
So how does any of that add up to a Nobel Peace Prize?
Mr. Slick should win a Nobel Anti-Peace Prize.
Get the HOOK. Obama is a ONE TERM CARTER!
This might be a stupid program but its not a nefarious one. Fed's been publicizing its buying for a while. One recent example: October 8, 2009 on YAHOO Bernanke points out:
"As the crisis has eased, so has demand for some of the Fed's lending programs. Short-term lending, which hit $1.1 trillion at the end of last year, when the crisis was still mounting, has fallen to about $264 billion, a drop of more than 75 percent since the turn of the year, Bernanke said.
"We expect this trend to continue as markets improve," he said.
Demand for another "commercial paper" program that provides companies with short-term financing needed to pay for salaries and supplies also has declined sharply, from $334 billion at the turn of the year to less than $50 billion currently, Bernanke said.
Meanwhile, the Fed is on track to wrap up this month a $300 billion program to buy government debt. That program aims to lower rates for mortgages and other consumer debt, the Fed chief said.
The Fed also is buying $1.25 trillion worth of mortgage-backed securities, in another move to force down mortgage rates. Bernanke said both programs appear to be having their "intended effect."
The Fed chief once again expressed his displeasure at last year's rescue of insurance giant American International Group and the Fed's financial backing of JPMorgan's takeover of Bear Stearns. Those operations were taken "with great discomfort," Bernanke said."
Anonymous comment:
The Fed doing what it says it is going to do maybe putting a bad policy in action, but its lawful and certainly not any action which someone at this point should call nefarious--even if percipitious action by large players shall disrupt the chartist world view.
Not sure why doing it quickly matters, nor why doing it in short chops matters. So many bonds churn through the finance sphere the auctions are almost small blips, or so it seems to me. Should be easier for the fed to buy in one auction rather than day trading their way through several.
Ah, to be a government regulator bitched at for doing things too slow or too quickly, or anything at all. I'm not one and perhaps that's good as I dislike constant and often unjustified criticism.
The entire article reads:
Fed boss sees no rush to boost rates
Bernanke sees no rush to boost rates; confident Fed can reel in support when time is right
• By Jeannine Aversa, AP Economics Writer
• On 7:08 pm EDT, Thursday October 8, 2009
o
Buzz up! 1
o Print
• Companies:
o Fannie Mae
o Freddie Mac
WASHINGTON (AP) -- Federal Reserve Chairman Ben Bernanke sent a fresh signal Thursday that he's in no rush to reverse course and start boosting interest rates.
Related Quotes
Symbol Price Change
FNM
1.49 +0.01
FRE
1.78 -0.01
{"s" : "fnm,fre","k" : "c10,l10,p20,t10","o" : "","j" : ""}
The Fed's key bank lending rate is now at a record low near zero and will probably stay there for an "extended period," Bernanke said in prepared remarks to a Fed conference here.
That echoed the pledge he and his colleagues made at their meeting in late September. The goal: super-low rates will entice people and businesses to spend more, nurturing the budding recovery.
In a surprise move earlier this week, Australia's central bank raised rates, the first nation in the Group of 20 countries to do so. The move raised questions about which country would be next.
Although Bernanke has previously said the United States is likely out of recession, he has warned that the recovery won't be robust enough to prevent the unemployment rate -- now at a 26-year high of 9.8 percent -- from rising. It is expected to top 10 percent this year, and rise as high as around 10.5 percent in the middle of next year before slowly drifting downward.
Still, Bernanke made clear on Thursday that when the time is right the Fed will have the tools and the political will to reel in the unprecedented amount of money it has pumped into the economy to avoid unleashing inflation.
"At some point, however, as economic recovery takes hold, we will need to tighten monetary policy to prevent the emergence of an inflation problem down the road," Bernanke said.
The Fed chief laid out some more details about how the central bank would sop up the money.
Besides boosting its key bank lending rate, the Fed can raise the rate it pays banks on reserve balances held at the central bank, Bernanke said. That would give banks an incentive to keep their money parked there, rather than having it flow back into the economy, where it can stoke inflationary pressures. The Fed also can set up the equivalent of certificates of deposit for banks at the central bank, another incentive for banks to keep their money at the Fed.
The Fed also can drain money from the financial system by selling securities from its portfolio with an agreement to buy them back at a later date, Bernanke said. Such large-scale "reverse repurchase agreements" can be done with banks, Fannie Mae and Freddie Mac and other institutions, he said. Some analysts have said that might involve transactions with money market mutual funds. Or the Fed can sell a portion of its securities outright.
"Overall the Federal Reserve has a wide range of tools for tightening monetary policy when the economic outlook requires us to do so," Bernanke said. "We will calibrate the timing and pace of any future tightening, together with the mix of tools to best foster our dual objectives of maximum employment and price stability," he added.
It's sure to be a high-wire act for the Fed. Tightening too soon could short-circuit the recovery. Waiting too long could ignite inflation.
The Fed's balance sheet has ballooned to $2.1 trillion, reflecting the creation of a spate of lending programs intended to ease the financial crisis. That's more than double before the crisis struck.
As the crisis has eased, so has demand for some of the Fed's lending programs.
Short-term lending, which hit $1.1 trillion at the end of last year, when the crisis was still mounting, has fallen to about $264 billion, a drop of more than 75 percent since the turn of the year, Bernanke said.
"We expect this trend to continue as markets improve," he said.
Demand for another "commercial paper" program that provides companies with short-term financing needed to pay for salaries and supplies also has declined sharply, from $334 billion at the turn of the year to less than $50 billion currently, Bernanke said.
Meanwhile, the Fed is on track to wrap up this month a $300 billion program to buy government debt. That program aims to lower rates for mortgages and other consumer debt, the Fed chief said.
The Fed also is buying $1.25 trillion worth of mortgage-backed securities, in another move to force down mortgage rates. Bernanke said both programs appear to be having their "intended effect."
The Fed chief once again expressed his displeasure at last year's rescue of insurance giant American International Group and the Fed's financial backing of JPMorgan's takeover of Bear Stearns. Those operations were taken "with great discomfort," Bernanke said.
Aren't Accrued Interest and Across the Curve two different bloggers?
SMOKEN ACES!!
http://acrossthecurve.com/?p=9264
Uh I don't understand. This article states only 170 million of 2.6 billion and yet yesterdays ZH article clear shows the CUSIP of a 2 Year bill valued at roughly 5 Billion.
So which is it? Was the ZH article correct and they bought the 2 year note? Or was it only a partial buy? Can some one explain please?
Thanks!
Let me know when you begin selling shares of ZH. I am in.
This note is from john jansen. When will you fix the error and admit the error?
Hey John, you are correct: this was a link to accrued interest, not accross the curve, which is your blog. Although, correct me if i am wrong, you do not believe the Fed is monetizing via QE either?
FYI, you linked to Accrued Interest, an excellent blog not written by John Jansen, and attributed the link to Across the Curve (Jansen's blog.)
Might want to correct htat.
Hey Tyler,
The Across the Curve guy says you are attributing Accrued Interest's post to Across the Curve. You might want to check it out.
Across the Curve on ZeroHedge:
http://acrossthecurve.com/?p=9264
Just checking the links, I think the Across the Curve guy is right...unless it is one and the same guy?
"PS. It appears our observations riled up another bond expert, Across the Curve, who claims that this is, as usual, nothing out of the ordinary, and also claims that he does not read Zero Hedge yet devotes numerous paragraphs to refuting just that. For his commentary see here:
http://accruedint.blogspot.com/2009/10/ben-bernanke-only-you-could-be-so... "
Karl Denninger is on fire down in Florida. No doubt about it, Karl is fired up!
Be sure to pace yourself folks, best make sure the glad-handing and self-congratulation lasts. It is a 3-day weekend after all.
On a frequent basis I'll check this and a handful of others...while the scattering of information is useful and definitely necessary when contrasted to the cacophony of CNBC & others, it borders on hubris to flame against others who may question one of your prior held points or thesis. Isn't lack of debate in the MSM, etc a key reason that ZH exists ? Just seems odd to question debate.
State your case thusly and let it stand. cheers all
Anyone who has ever run an operation involving cash registers knows the bank drill for handling all that loose change. You bring it in, they take their sweet time counting it and your account gets credited sometime(that would be a couple days) later. Don't try writing a check against that $600 in loose change until that time.
But what's a few billion between friends who all belong to the same social club, especially if it's someone elses few billion? Franz Kafka couldn't write this stuff( literary allusion for all the highbrow types out there).
What a bunch of crap. To be in AUTHORITY. You have to AUTHOR something. The FED is an AUTHORITY and all that it AUTHORS is lies. That includes the printing of every single dollar on the planet. It's a BOOK of lies. Based on a system that is a MATHEMATICAL lie. ALL FRACTIONAL RESERVE SYSTEMS MUST BE MONETIZED REGULARLY TO KEEP THEM FROM DIVERGING TOO MUCH FROM THE UNDERLYING ASSET TRUTHS.
The US monetized through the gold standard when it bought up gold at 22 an ounce. Let the RUNNERS of the scam ship the gold off to england. Then raised the price to 35 an ounce and let them ship it back and sell it.They ran the scam for a while got excess paper notes on the gold. Let the people with the most notes buy it up and then corrected and balanced the notes not as a entire fair unit. But only for those who were in on it with the central bank and able to ship the gold off and ship it back and sell it.
They are directly monetizing AKA zimbabwe right now. AKA revolving auctions ala Russia 1998.
The FED is an AUTHORITY. It's AUTHORITY is based on LIES. It prints, calculates, says, and publishes LIES. LIES are the source of all it's POWER and AUTHORITY. Every bond that the FED authors is a mathematical and moral LIE. The only question is how BIG of a lie it is and where it leads to.
John Jansen Qouted zh here:
"Here is the entire piece posted at Zero Hedge:
In a brilliant piece of investigative reporting, Chris Martenson (original article here) has uncovered that the Fed, merely a week after issuing $28 billion in 7 year bonds (which Zero Hedge discussed previously) via its puppet, the US Treasury, of which $10 billion ended up being purchased by primary dealers, has turned and bought 47% of the primary allocated bonds in Open Market Purchases. This is undisputed monetization removed simply via one primary dealer and less than 5 days of temporal separation in order to leave no easy trace."
We can see very clearly that TD is mentioning the treasury with the statement(via its puppet,the US treasury). But I guess the word puppet confused our friend(or may be he was high)because this is how he presented his great knpoledge,in contrast to the poor knowledge of TD(I qoute from his comment:
"The author (Tyler Durden) makes the statement that the Federal Reserve bought the bonds just one week after issuing the bonds. Anyone with a modicum of understanding of the process knows that the Federal Reserve does not issue bonds. The bonds are issued by the US Treasury and then the Federal Reserve purchases them in the “open market”."
Very clearly, John Jansen is claiming that TD have no(modicum of understanding)and using big words to cover his lack of uderstanding for the whole purpose of the zh article.
I read the post you linked to at Absolute Return and it was a very thoughtful, reasonable analysis. I wish I saw more of this balance on Zero Hedge, which I enjoy reading but always feel like it's collective conscience is just on the verge of paranoid schizophrenia.
15. On no account should so much as a single unit above the definite and freely estimated sums be retained in the State Treasuries, for money exists to be circulated and any kind of stagnation of money acts ruinously on the running of the State machinery, for which it is the lubricant; a stagnation of the lubricant may stop the regular working of the mechanism.
FDIC is broke, and can no longer close banks without a loan from the paper printers. The end of the buck as we know it nears closer.