Where does the $580 billion come from that the interior bank are using surrounded by the sub-prime mortgage rescue loan?
Same as the the money that the the US Federal Reserve is auctioning off to the banks - How is the money in reality raised?
Answers:
Money from the Fed comes from 'thin air'. I.e. they have the authority to create money for the discount as needed.
This particular arrangement is an extension of Discount Window operations. Normally bank can approach the Discount Window for overnight loans at a pre-announced rate.
In this case, the Fed is auctioning billions in loans at 35-day language. Banks bid an interest rate that they will pay for that money and the highest interest rate bid win.
So none of this is financed by the tax payer. In fact, adjectives that interest that the Fed will make on those billions of dollars in loans? By tenet, they have to turn over excess income (after expenses) to the Treasury. In a sense, it is a government bail-out where on earth the government makes money. Source(s): For more details, see
http://federalreserve.gov/newsevents/pre…
http://www.federalreserve.gov/monetarypo…
http://www.federalreserve.gov/monetarypo…
The FED holds reserves of US rule securities, and when necessary, makes them available to bank. It doesn't cost the taxpayers anything. It was also done in 1998 for the Savings and Loan bailout, and for Y2K contained by 1999/2000.
The purpose of the FED is to make certain that in that is enough money available to provide for smooth economic operation. Since the credit market is getting tight, it makes businesses and individuals incapable of getting the financing they involve to continue operations. If this problem exaggerates, it could cripple the discount. The FED is taking these steps to avoid such a crippling.
The below link is helpful for sensitive more about the FED. Source(s): http://en.wikipedia.org/wiki/Federal_Res…
Related Questions:
Whats the smallest amount TODAY (july 2008) youd own to put down on a non disclosure mortgage loan?
im seeing 20-25%, but are there some banks that may turn lower? If you can even find them - expect to put down at tiniest 10%, if not 20%. Can you even find no-doc loans...
Answers:
Money from the Fed comes from 'thin air'. I.e. they have the authority to create money for the discount as needed.
This particular arrangement is an extension of Discount Window operations. Normally bank can approach the Discount Window for overnight loans at a pre-announced rate.
In this case, the Fed is auctioning billions in loans at 35-day language. Banks bid an interest rate that they will pay for that money and the highest interest rate bid win.
So none of this is financed by the tax payer. In fact, adjectives that interest that the Fed will make on those billions of dollars in loans? By tenet, they have to turn over excess income (after expenses) to the Treasury. In a sense, it is a government bail-out where on earth the government makes money. Source(s): For more details, see
http://federalreserve.gov/newsevents/pre…
http://www.federalreserve.gov/monetarypo…
http://www.federalreserve.gov/monetarypo…
The FED holds reserves of US rule securities, and when necessary, makes them available to bank. It doesn't cost the taxpayers anything. It was also done in 1998 for the Savings and Loan bailout, and for Y2K contained by 1999/2000.
The purpose of the FED is to make certain that in that is enough money available to provide for smooth economic operation. Since the credit market is getting tight, it makes businesses and individuals incapable of getting the financing they involve to continue operations. If this problem exaggerates, it could cripple the discount. The FED is taking these steps to avoid such a crippling.
The below link is helpful for sensitive more about the FED. Source(s): http://en.wikipedia.org/wiki/Federal_Res…
Related Questions:
Whats the smallest amount TODAY (july 2008) youd own to put down on a non disclosure mortgage loan?
im seeing 20-25%, but are there some banks that may turn lower? If you can even find them - expect to put down at tiniest 10%, if not 20%. Can you even find no-doc loans...