FOMC Statement - Agency Debt Monetization Is Being Reduced!
Press Release
Release Date: November 4, 2009
For immediate release
Information received since the Federal Open Market Committee met in September suggests that economic activity has continued to pick up. Conditions in financial markets were roughly unchanged, on balance, over the intermeeting period. Activity in the housing sector has increased over recent months. Household spending appears to be expanding but remains constrained by ongoing job losses, sluggish income growth, lower housing wealth, and tight credit. Businesses are still cutting back on fixed investment and staffing, though at a slower pace; they continue to make progress in bringing inventory stocks into better alignment with sales. Although economic activity is likely to remain weak for a time, the Committee anticipates that policy actions to stabilize financial markets and institutions, fiscal and monetary stimulus, and market forces will support a strengthening of economic growth and a gradual return to higher levels of resource utilization in a context of price stability.
With substantial resource slack likely to continue to dampen cost pressures and with longer-term inflation expectations stable, the Committee expects that inflation will remain subdued for some time.
In these circumstances, the Federal Reserve will continue to employ a wide range of tools to promote economic recovery and to preserve price stability. The Committee will maintain the target range for the federal funds rate at 0 to 1/4 percent and continues to anticipate that economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels of the federal funds rate for an extended period. To provide support to mortgage lending and housing markets and to improve overall conditions in private credit markets, the Federal Reserve will purchase a total of $1.25 trillion of agency mortgage-backed securities and about $175 billion of agency debt. The amount of agency debt purchases, while somewhat less than the previously announced maximum of $200 billion, is consistent with the recent path of purchases and reflects the limited availability of agency debt. In order to promote a smooth transition in markets, the Committee will gradually slow the pace of its purchases of both agency debt and agency mortgage-backed securities and anticipates that these transactions will be executed by the end of the first quarter of 2010. The Committee will continue to evaluate the timing and overall amounts of its purchases of securities in light of the evolving economic outlook and conditions in financial markets. The Federal Reserve is monitoring the size and composition of its balance sheet and will make adjustments to its credit and liquidity programs as warranted.
Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; Elizabeth A. Duke; Charles L. Evans; Donald L. Kohn; Jeffrey M. Lacker; Dennis P. Lockhart; Daniel K. Tarullo; Kevin M. Warsh; and Janet L. Yellen.
on Wed, 11/04/2009 - 14:29
#120009
Market action sure feels like there's a passing of long positions to the greater fool.
on Wed, 11/04/2009 - 14:32
#120011
There were some nasty spike downs to steal stops on the /DX.
on Wed, 11/04/2009 - 14:33
#120012
They can always create a new program to soak up MBS, or make the banks hold them on their books but have the gov guarantee them. They are never never never ever going to walk away and let the mortgage market implode, mortgage rates spike etc. Hasn't the Freddie/Fannie nationalization taught us that?
Take the statement for the jawboning that it is.
on Wed, 11/04/2009 - 14:40
#120024
Never. The dollar will collapse long before the Fed stops buying MBS on anything but a temporary basis.
on Wed, 11/04/2009 - 14:48
#120044
is it not becoming apparent that this is the intended outcome will other cooperate - channeling Robert J. Aumann, and Thomas C. Schelling who won the Nobel in economic sciences for work they did separately on game theory.
on Wed, 11/04/2009 - 15:04
#120081
WF is going to start writing 10yr interest only loans betting that the market improves.
on Wed, 11/04/2009 - 14:33
#120013
Question for BB: Rampant overcapacity with demand settling at a lower plateau, who buys the debt and how do you service the rising interest costs that will accompany the growing appreciation of insolvency - rinse wash repeat
on Wed, 11/04/2009 - 14:34
#120014
Oh yeah, they are going to slow down the purchase of MBS. Just like last month.
Didn't happen last month, relative to Fannie/Freddie issuance, not gonna happen this month.
The only thing slowing down Fed purchases is the growing share of Ginnies (FHA), which do have a bid in the real market.
on Wed, 11/04/2009 - 14:35
#120016
BTW, just bought the shit out of GLD as a temporary position until I can exchange it for physical. This release was even more proof that these guys will stop at nothing to destroy the dollar.
on Wed, 11/04/2009 - 14:42
#120028
Agreed on this take.
on Wed, 11/04/2009 - 14:45
#120034
i disagree entirely. an INCREASE in QE would be proof of that, but that is in fact being even slightly revised down. they havent said anything at all (although the "increase in consumption" bit belies their utter incompetence). Real economy is getting worse, and nothing left to hold down reference rate. look at yields already - anethema to the economy, the flood of liquidity has not been increased.
on Wed, 11/04/2009 - 14:51
#120049
There was no chance they would announce new QE today. Anything that dramatic will come after Obama announces a stimulus 2.0.
You have to think like a criminal; remember, they all favor a 'strong dollar' even as it sinks into the abyss. They won't tell the truth ever. Do you really think they are going to quit buying MBS? Stop printing and propping the markets? Not a chance.
on Wed, 11/04/2009 - 15:18
#120097
Bought a fuckload - again.
on Wed, 11/04/2009 - 15:27
#120113
Stupid question, but what/where is the best place to buy physical gold bullion? Thanks.
on Wed, 11/04/2009 - 15:48
#120149
Might not be the cheapest way, but I've been happy with apmex.com for the last 8 years; recently, however, their prices seem to gone up a bit, as well as an increase in shipping costs.
on Wed, 11/04/2009 - 15:53
#120157
I like apmex for some of the best prices. Sometime I pay a little more to buy from Midas, but they give a lot of contributions to Ron Paul and other causes I support.
on Wed, 11/04/2009 - 17:25
#120264
When you buy from a place like Apmex or Midas, what type of physical gold do you actually purchase - 1/10 oz gold medal bars, or larger? Sorry I'm new at this and only have a few thousand to spend at the most. Thanks.
on Wed, 11/04/2009 - 23:43
#120601
Stick with 1oz bullion coins. Can't go wrong with American Eagles (or Krugs, Phils, Maples).
The more small fractionals you buy, the more premium you are going to pay.
10 X 1/10oz fractionals = $1270
1X 1oz Eagle= $1141
I am also a big fan of APMEX. I have also used and been happy with BullionDirect.com as well.
on Wed, 11/04/2009 - 14:36
#120017
but point is, no new Treasury QE was announced. there is no way to keep the reference rates down without moving from risk-assets. i have increased putspreads against IWM.
on Wed, 11/04/2009 - 14:43
#120030
Growing excess reserves will mop up much more UST issuance than the Fed would buy. It is a charade.
on Wed, 11/04/2009 - 14:47
#120042
certainly possible. Either way, risk assets are F'd.
debate over direction of gold or silver is seperate, though, i dont want to be in them at their highs when every one and Chavez's mother is short dollar. wait for an eastern european devaluation and dollar screams higher.
on Wed, 11/04/2009 - 14:50
#120047
unrelated but the swione outbreak and scare in ukraine is a potential domino on multiple fronts (gas, wheat, eastern europe etc..)
on Wed, 11/04/2009 - 14:57
#120063
Possible? Just look at bank balance sheets. It's no big secret.
Yeah, wait, wait, wait. You sound just like the other dude on this board who claimed gold would pull back to 800. 150 bucks ago.
on Wed, 11/04/2009 - 14:51
#120050
Not to mention (wink, wink) "indirect" buyers.
on Wed, 11/04/2009 - 14:59
#120071
I swear to God, GG, you can slap some people in the face with the truth, and they still don't get it.
Too bad for them, can't say they weren't warned.
Meanwhile the deflationists get poorer by the day.
on Wed, 11/04/2009 - 14:57
#120064
Whats this do for China?
on Wed, 11/04/2009 - 14:39
#120022
For the last few months, I could've copied and pasted the previous FOMC statement into a story and there would have hardly been a difference. CNBC were focusing on "increased consumer spending." Everyone knew consumer spending was up in Q3.
on Wed, 11/04/2009 - 14:42
#120027
Yes if increase transfer payments and rebates spending/velocity goes up - if not by volume then price. wages are old paradigm
on Wed, 11/04/2009 - 14:45
#120032
Sewing the seeds for Stim II.....
on Wed, 11/04/2009 - 14:47
#120039
Momentum deferred at 1060. Now back to 1030 please.
on Wed, 11/04/2009 - 14:55
#120058
.....quickly followed by gap fill at 1018.
on Wed, 11/04/2009 - 14:58
#120068
You're dreaming of a market that follows normal fundamentals and technicals. Sorry i have to do this. It's for your own good: *pinch*
on Wed, 11/04/2009 - 14:56
#120061
No signs of inflation? Crude at 81????????????
on Wed, 11/04/2009 - 15:45
#120144
Energy or anything that you need don't count. Come on. Get wid da program here.
on Wed, 11/04/2009 - 14:58
#120067
Beyond the FED... the Congress and Gvt. are about to enact a new $45B fiscal stimulus package.(http://www.bloomberg.com/apps/news?pid=20601087&sid=amPE8jkWa4y4&pos=8)
While fiscal stimulus is necessary, just as has been the case with every measure so far, the new fiscal stimulus is completely inefficient and unfair. $33B in tax refunds for money losing companies. $10B for tax credits for buying houses, with existing owners making money on their own being eligible. $2.4B for extended unemployment insurance. Just in case you had any remaining hope as to where the cleptocracy's priorities remain. Change you can believe in.
on Wed, 11/04/2009 - 15:39
#120133
This sickens me
The measure includes $2.4 billion to extend unemployment benefits for as many as 20 weeks, enough to aid the jobless through the holiday season. It would loosen tax rules for homebuilders and other money-losing companies to let them claim an estimated $33 billion in tax refunds this year, according to Joint Committee on Taxation estimates
Why do homebuilders need to be handed huge sums of money? They are as culpable as the banks in creating the housing market mess because they massively overdeveloped. You should see some of these 30 square mile housing developments they built out here during the boom years. I wouldn't be surprised if at least a quarter of those brand new houses are unoccupied.
on Wed, 11/04/2009 - 14:59
#120069
Here is a concise summary of what the FOMC said:
Not that surprising since the FOMC is completely cornered at this point. There is no course of action which doesn't lead to TOTAL annihilation of the monetary system as well as the Fed itself.
However, there was one little gem in there:
ROTFLMFAO!
on Wed, 11/04/2009 - 15:01
#120075
Fed to Wall Street pigmen: the trough will be refilled forever. Wallow at will.
on Wed, 11/04/2009 - 15:16
#120093
Addendum: "Blah, blah blah, please don't buy gold because it will screw our plans and some of our biggest banks, blah blah blah."
on Wed, 11/04/2009 - 15:02
#120079
I would love to see a bberg, wsj, reuters headline that said: "Wall Street Extends Gains as Fed Extends USD Destroying Policies"
And the content of the article would be a single picture: 10yr DXY/SPX chart.
on Wed, 11/04/2009 - 15:05
#120080
As a sign of respect towards what the FOMC just blathered out, Gold has just decided to scale the $1100 peak in short order.
on Wed, 11/04/2009 - 15:23
#120104
+1 (Almost there ... 1096.10)
on Wed, 11/04/2009 - 15:08
#120085
There is nothing really dramatic here.
What we do know is that there is enough demand for agency debt to keep Fed intervention at bay in that area. There's plently of crappy MBS that the Fed is still willing to sop up.
Bottom line, is that the Fed has become slightly more restrictive at the margin-- to their credit the Fed is phasing out some of the "alphabet soup" loan programs. With Fed fund rates at zero, GS will still get to play limitless hedge fund games, and other TBTF banks will get to use cheap borrowed money to buy their own Treasuries. And the dollar will be sacrificed in favor of buying questionable derivatives until at least March 2010.
on Wed, 11/04/2009 - 17:32
#120271
It changed who is betting against the Fed.
Without QE, Treasury purchases will come from draining liquidity. The Fed WILL force yields down. Other assets get the divine hammer.
on Wed, 11/04/2009 - 15:16
#120094
"The Federal Reserve is monitoring the size and composition of its balance sheet"
Secretary to Bernanke... 'please Sir, can you get some wider pieces of paper and a new zero key, I have worn yet another one out again'
on Wed, 11/04/2009 - 15:29
#120107
from the statement
"In order to promote a smooth transition in markets, the Committee will gradually slow the pace of its purchases of both agency debt and agency mortgage-backed securities"
---
translation
all your mbs are belong to us
on Wed, 11/04/2009 - 15:29
#120117
Simple question here. What are the terms of these ($1.2 Trillion) Agency MBS that the Fed is buying. Must they be bought back by the seller? What are the terms? Is there a book loss here for the taxpayers?
on Wed, 11/04/2009 - 15:32
#120122
Simple question here. What are the terms of these ($1.2 Trillion) Agency MBS that the Fed is buying. Must they be bought back by the seller? What are the terms? Is there a book loss here for the taxpayers?
on Wed, 11/04/2009 - 15:46
#120147
Not disclosed and no (so the other 2 questions are moot).
Fed's MBS FAQ = http://www.newyorkfed.org/markets/mbs_faq.html
on Wed, 11/04/2009 - 16:10
#120183
What's the question? They are buying the MBS in the open market, for cash, from MBS sellers like WFC and BAC as the originate mortgages and Fannie/Freddie guarantees them. There is no seller recourse or anything.
There is no book loss for the "taxpayer", but the Fed is underwater on many of their purchases from earlier in the year, they were paying par for FNMA 4s for a long time, those are now at 97-29 or so. And if they ever stopped buying, that bid would evaporate pretty quickly, it would be near impossible to sell 4s.
on Wed, 11/04/2009 - 15:32
#120123
Words such as these, do not inspire me with confidence that any sort of recovery is underway and it must be pretty awful out there if they use these words .. especially when they generally are so keen to understate how bad it actually is
"Conditions in financial markets were roughly unchanged
Businesses are still cutting back
remains constrained by ongoing job losses, sluggish income growth, lower housing wealth, and tight credit
actions to stabilize financial markets and institutions
gradual return
substantial resource slack
continues to anticipate that economic conditions...... are likely to warrant exceptionally low levels"
on Wed, 11/04/2009 - 15:42
#120139
Denninger's take on the release is fairly humorous.
http://market-ticker.org/archives/1579-FOMC-In-English.html
on Wed, 11/04/2009 - 18:39
#120371
Ha-Ha !!
" FOUR YEAR OLDS AND CATS ARE CASHING THE $ 8,000 FIRST TIME HOMEBUYER CREDITS, according to the IRS ".
That Denninger is a funny guy.
on Wed, 11/04/2009 - 16:02
#120148
Whitney's comments earlier today were quite interesting I thought. They didn't seem to catch much light, or not as much as she would normally.
http://highfrequency.tumblr.com/
on Wed, 11/04/2009 - 15:52
#120156
You walk into the room
With your pencil in your hand
You see somebody naked
And you say, "Who is that man?"
You try so hard
But you don't understand
Just what you'll say
When you get home
Because something is happening here
But you don't know what it is
Do you, Mister Jones?
on Wed, 11/04/2009 - 17:23
#120262
Thanks Marley for the words from the Bard, a man who saw through bullshit at an early age and called it for what it was and is. Today's FOMC announcement said nothing othet than: "stay the course."
Actually thought DOW rising and gold climbing today before 2:15 EST to be a bit risky (unless a pump and dump, as to the equities), as I expected to hear the faintest glimmer of coming restraint in the FOMC statement that would have the equities dropping like a stone, but I also thought the timing interesting in light of gold's recent performance to see if gold would also react similarly. Backwardation, as I understand it, should manifest itself first in a disconnection from this "dollar down, risk assets up; dollar up, risk assets down" nonsense by failing to go down when the dollar goes up, measured against oil, equities, etc. That would be a "tell" that gold is being sought as a store of monetary value, and a sign of loss of confidence in the Federal Reserve Notes.
on Wed, 11/04/2009 - 18:19
#120344
northwest territorial mint. low premium over spot, free delivery 8-12 week backlog I've only bought silver from them. delivery was within their timeframe.
on Thu, 11/05/2009 - 11:04
#120812
Do a little bit of Googling before purchasing from these folks. You might decide to go with some of the recommendations above instead.
on Wed, 11/04/2009 - 19:01
#120392
More rubbish. This statement is clear to me; our policies are not having the desired effect and were very worried over the inflation expectations that have become "unanchored" by every rational person on the planet because of our campaign to destroy the USD. The FED just high lights its incompetence and fears with statements like this one. They actually increase cognitive dissonance when their minutes run counter to their "green shoots" statements. The markets knee jerk reaction was correct after the statement was announced. This was followed by a prop job in the form of a 3pm ramp to entice buyers. It utterly failed as well as the breakout from the downward trend channel. Good job FOMC! With you guys at the helm, the US economy is in good hands and recovery is sure to come - not.
on Wed, 11/04/2009 - 20:27
#120477
The big unknown is what will happen after the end of the first quarter when they stop buying these instruments? Higher rates likely, but by how much? And then we have the presumed liquidity draining through that time according to another ZH article.
The going may be good in the stock market through the end of the year, but it will become increasingly trickier to navigate after that!
time123
admin: http://invetrics.com
on Wed, 11/04/2009 - 20:55
#120498
When Fed quits, the relief pitcher will come in . They'll be flush with SEC-approved trading profits and will cherry pick through the pile of warmer turds. By March, things will be much worse. Then the only remaining dilemma will squarely be on the so-called " private sector TBTFs and good old GS " ........a prescribed move into the old "catch the falling knives " drill . The game they used to be quite good at in more predictable times .
By March, the game in equities will have to transition to a very different form of manipulation that appears more in line with logic and tangible assessed value.
It's in the playbook somewhere.
on Thu, 11/05/2009 - 08:03
#120700
FOMC statement was all about economic "weakness".
If these sobs are telling the truth, there ain't much
of a recovery and they expect the bubble to crack up
of its own weight. Hard to draw any other conclusion.
on Thu, 11/05/2009 - 11:06
#120816
Things are so great that we have to keep acting like they aren't. Nice Fed doublespeak.
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