USA adds a further 800 BILLION to last months 700 Bn bailout

[amir_j]

yikes!!

The Federal Reserve is to inject another $800bn (£526.8bn) into the US economy in a further effort to stabilise the financial system.

US Treasury Secretary Henry Paulson said the stimulus package aimed to make more lending available to consumers.

About $600bn will be used to buy up mortgage-backed securities while $200bn is being targeted at unfreezing the consumer credit market.

Under the latest rescue plan - which is in addition to the already-announced $700bn bank bail-out - the Fed is to buy up to $100bn in debt from the troubled mortgage giants Fannie Mae and Freddie Mac.

The central bank said it would also buy another $500bn in mortgage-backed securities - pools of mortgages that are bundled together and sold to investors.

The Fed said that the $600bn effort to support the mortgage market was being taken to reduce the cost of home mortgages and increase their availability.

It said the purchases of the mortgages and mortgage-backed securities would take place over a number of months.

In addition to the $600bn effort on mortgages, the Fed also unveiled a separate programme to help unfreeze the consumer debt market.

The central bank said it would lend up to $200bn to the holders of securities backed by various types of consumer loans, such as credit cards and student loans.



http://news.bbc.co.uk/2/hi/business/7748362.stm

Edited by amir_j on Tuesday 25th November 16:18

[FourWheelDrift]

Looks like the final throws of a dying Republican government's short term financial solution designed to screw the new democrats so they don't get re-elected next time. Brown is doing the same thing here.

[evenflow]

To the layman (me), these figures just looked so astronomically ridiculous as to be plucked from the air. Where is it all coming from? Taxpayers? Do they have that money or is it yet to be collected?

[amir_j]

evenflow said:

To the layman (me), these figures just looked so astronomically ridiculous as to be plucked from the air. Where is it all coming from? Taxpayers? Do they have that money or is it yet to be collected?

The 700 billion were treasury bonds being sold mostly to other governments in asia eg China iirc, ie they are borrowing the money and paying interest.

Edited by amir_j on Tuesday 25th November 16:39

[Gun]

Good luck Obama trying to clean that up.

[Martin2008]

I wonder how much the Iraq/Afghanistan war cost in real money ?

[amir_j]

Martin2008 said:

I wonder how much the Iraq/Afghanistan war cost in real money ?

Have to bear in mind they 'benefited' from the oil in Iraq along with awarding all those contracts to american companies.

[Fittster]

amir_j said:

evenflow said:

To the layman (me), these figures just looked so astronomically ridiculous as to be plucked from the air. Where is it all coming from? Taxpayers? Do they have that money or is it yet to be collected?

The 700 billion were treasury bonds being sold mostly to other governments in asia eg China iirc, ie they are borrowing the money and paying interest.

Edited by amir_j on Tuesday 25th November 16:39

And how long before they start questioning if the US can ever repay these bonds?

[amir_j]

Fittster said:

amir_j said:

evenflow said:

To the layman (me), these figures just looked so astronomically ridiculous as to be plucked from the air. Where is it all coming from? Taxpayers? Do they have that money or is it yet to be collected?

The 700 billion were treasury bonds being sold mostly to other governments in asia eg China iirc, ie they are borrowing the money and paying interest.

And how long before they start questioning if the US can ever repay these bonds?

The US treasury bonds were the top tier of safe debt in the world, the CDS* on these were non existant , now its not the case from what im told.

Effectively speaking they can always re-pay by just printing money, but that would be disastrous as you can imagine.

• For the non geeks, Credit Default Swaps, which is essentially an insurance against default.

Edited by amir_j on Tuesday 25th November 16:55

[amir_j]

anonymous said:

[redacted]

you know what I mean!!

[Fittster]

amir_j said:

Fittster said:

amir_j said:

evenflow said:

To the layman (me), these figures just looked so astronomically ridiculous as to be plucked from the air. Where is it all coming from? Taxpayers? Do they have that money or is it yet to be collected?

The 700 billion were treasury bonds being sold mostly to other governments in asia eg China iirc, ie they are borrowing the money and paying interest.

And how long before they start questioning if the US can ever repay these bonds?

The US treasury bonds were the top tier of safe debt in the world, the CDS* on these were non existant , now its not the case from what im told.

Effectively speaking they can always re-pay by just printing money, but that would be disastrous as you can imagine.

• For the non geeks, Credit Default Swaps, which is essentially an insurance against default.

Edited by amir_j on Tuesday 25th November 16:55

What is the point of Credit Default Swaps for US treasuries? If the yanks did default, which leads to all kinds of horrors what are the chances of actually getting a paid out.

[gtdc]

evenflow said:

To the layman (me), these figures just looked so astronomically ridiculous as to be plucked from the air. Where is it all coming from? Taxpayers? Do they have that money or is it yet to be collected?

From the Somali pirates... obviously.

[amir_j]

Fittster said:

amir_j said:

Fittster said:

amir_j said:

evenflow said:

To the layman (me), these figures just looked so astronomically ridiculous as to be plucked from the air. Where is it all coming from? Taxpayers? Do they have that money or is it yet to be collected?

The 700 billion were treasury bonds being sold mostly to other governments in asia eg China iirc, ie they are borrowing the money and paying interest.

And how long before they start questioning if the US can ever repay these bonds?

The US treasury bonds were the top tier of safe debt in the world, the CDS* on these were non existant , now its not the case from what im told.

Effectively speaking they can always re-pay by just printing money, but that would be disastrous as you can imagine.

• For the non geeks, Credit Default Swaps, which is essentially an insurance against default.

Edited by amir_j on Tuesday 25th November 16:55

What is the point of Credit Default Swaps for US treasuries? If the yanks did default, which leads to all kinds of horrors what are the chances of actually getting a paid out.

Its an insurance like any other, the p'insurance company' you pay the premium to pays out. Unless they gets sums wrong and go bust as was the case with AIG having to be propped up.

[rude-boy]

amir_j said:

Fittster said:

amir_j said:

Fittster said:

amir_j said:

evenflow said:

To the layman (me), these figures just looked so astronomically ridiculous as to be plucked from the air. Where is it all coming from? Taxpayers? Do they have that money or is it yet to be collected?

The 700 billion were treasury bonds being sold mostly to other governments in asia eg China iirc, ie they are borrowing the money and paying interest.

And how long before they start questioning if the US can ever repay these bonds?

The US treasury bonds were the top tier of safe debt in the world, the CDS* on these were non existant , now its not the case from what im told.

Effectively speaking they can always re-pay by just printing money, but that would be disastrous as you can imagine.

• For the non geeks, Credit Default Swaps, which is essentially an insurance against default.

Edited by amir_j on Tuesday 25th November 16:55

What is the point of Credit Default Swaps for US treasuries? If the yanks did default, which leads to all kinds of horrors what are the chances of actually getting a paid out.

Its an insurance like any other, the p'insurance company' you pay the premium to pays out. Unless they gets sums wrong and go bust as was the case with AIG having to be propped up.

I think the point is more along the lines that i could insure my house against nuclear attack. It is going to be of much use to me though if it is attacked...

[Fittster]

amir_j said:

Its an insurance like any other, the p'insurance company' you pay the premium to pays out. Unless they gets sums wrong and go bust as was the case with AIG having to be propped up.

If the US default I'm assuming that the global financial system goes into a catastrophic meltdown. Therefore the chances of whoever provided the CDS still being around is pretty small and the dollar would be pretty much worthless so there wouldn't be much value in any payout.

So why take out the CDS in the first place?

[amir_j]

rude-boy said:

amir_j said:

Fittster said:

amir_j said:

Fittster said:

amir_j said:

evenflow said:

To the layman (me), these figures just looked so astronomically ridiculous as to be plucked from the air. Where is it all coming from? Taxpayers? Do they have that money or is it yet to be collected?

The 700 billion were treasury bonds being sold mostly to other governments in asia eg China iirc, ie they are borrowing the money and paying interest.

And how long before they start questioning if the US can ever repay these bonds?

The US treasury bonds were the top tier of safe debt in the world, the CDS* on these were non existant , now its not the case from what im told.

Effectively speaking they can always re-pay by just printing money, but that would be disastrous as you can imagine.

• For the non geeks, Credit Default Swaps, which is essentially an insurance against default.

Edited by amir_j on Tuesday 25th November 16:55

What is the point of Credit Default Swaps for US treasuries? If the yanks did default, which leads to all kinds of horrors what are the chances of actually getting a paid out.

Its an insurance like any other, the p'insurance company' you pay the premium to pays out. Unless they gets sums wrong and go bust as was the case with AIG having to be propped up.

I think the point is more along the lines that i could insure my house against nuclear attack. It is going to be of much use to me though if it is attacked...

Huh? if the nuclear attack happened in london, your chinese insurance company would most likely still pay out.

The premium 'normally' covers the exposure (this time round was a screw up as they based premiums on the mortgage securities which were overvalued to say the least.)

Edited by amir_j on Tuesday 25th November 17:14

[Fittster]

amir_j said:

rude-boy said:

amir_j said:

Fittster said:

amir_j said:

Fittster said:

amir_j said:

evenflow said:

To the layman (me), these figures just looked so astronomically ridiculous as to be plucked from the air. Where is it all coming from? Taxpayers? Do they have that money or is it yet to be collected?

The 700 billion were treasury bonds being sold mostly to other governments in asia eg China iirc, ie they are borrowing the money and paying interest.

And how long before they start questioning if the US can ever repay these bonds?

The US treasury bonds were the top tier of safe debt in the world, the CDS* on these were non existant , now its not the case from what im told.

Effectively speaking they can always re-pay by just printing money, but that would be disastrous as you can imagine.

• For the non geeks, Credit Default Swaps, which is essentially an insurance against default.

Edited by amir_j on Tuesday 25th November 16:55

What is the point of Credit Default Swaps for US treasuries? If the yanks did default, which leads to all kinds of horrors what are the chances of actually getting a paid out.

Its an insurance like any other, the p'insurance company' you pay the premium to pays out. Unless they gets sums wrong and go bust as was the case with AIG having to be propped up.

I think the point is more along the lines that i could insure my house against nuclear attack. It is going to be of much use to me though if it is attacked...

Huh? if the nuclear attack happened in london, your chinese insurance company would most likely still pay out.

The premium 'normally' covers the exposure.

But wouldn't a US default be a global event? Would there be anyone left who could make good on those CDS?

Pretty much like the usefulness of house insurance after a global nuclear war.

[amir_j]

Now getting into a very different debate and im not a economist (work in financial and currently at a hedge fund so have lots of exposure) but:

1) The 'world order' is changing so US is becoming less and less dominant, if you see the credit crunch it has affected all countries but to much different degree's. In 50 years will it be a global event? Who knows
2) The bonds mature at very different dates and are staggered. If something happened which made 31 March 2011 bonds default, this may not have any effect on others maturing 6 months or a year later (ie not all the 700 billion bailout would have the same date, maybe over years) so the exposure to the insurer would be calculated at difference scenarios incuding all factors possible to imagine.
3) Bear in mind if was a default, the worse case would be incredible taxes on the american people and asset sell offs so the actual default would be the minimum possible as opposeed to all bonds for the period.