Blog Post

This quote below is from the NY Fed website. The second paragraph is frightening. So Goldman or Lehman or Morgan Stanley (not bear stearns,r.i.p.) creates some bogus CDO, gets the geniuses at S&P to rate is BBB or better, and the government buys it from them, at a "price"? whose price? the one the traders just got from passing 1% of it around the street in a couple of day trades? This is good for our economy?



"The Federal Reserve has announced that the Federal Reserve Bank of New York has been granted the authority to establish a Primary Dealer Credit Facility (PDCF). This facility is intended to improve the ability of primary dealers to provide financing to participants in securitization markets and promote the orderly functioning of financial markets more generally.



The PDCF will provide overnight funding to primary dealers in exchange for a specified range of collateral, including all collateral eligible for tri-party repurchase agreements arranged by the Federal Reserve Bank of New York, as well as all investment-grade corporate securities, municipal securities, mortgage-backed securities and asset-backed securities for which a price is available.



The PDCF will remain in operation for a minimum period of six months and may be extended as conditions warrant to foster the functioning of financial markets. "