Fed to keep rates low and brainwaves lower

Not surprising after yesterday's Dow beating, and S&P spanking, that the Fed rose to the occasion to save the US. Concluding there is further risk of economic deterioration (welcome to the planet), the Fed decided to really shake things up and try something different this time.

a) It will force member banks to divert the excess $1.6 trillion of debt they have stored on the Fed's book to pay for the creation of 3.2 million jobs.

b) It will revert the mortgage backed securities it's holding back to the banks it bought them from, even if those banks have to take a loss, to clear the slate. It will also remove all risk guarantees.

c) It will force banks to stop mortgage loan losses on their books through making them work immediately with individual borrowers to reduce loan principal and payments to a level more comparable to the current market, not the one the banks inflated with toxic assets scooping up fraudulent loans on over-valued properties.

d) It will cease current and future QE programs in order to stop cheapening the value of the dollar, and stop giving the Treasury a place to park the debt it creates, while Washington argues about how to cut the debt.

Just kidding. The Fed's going to keep rates around zero forever (or for the foreseeable future) and reinvest any proceeds of the assets it's holding into buying more of them, and keep the Treasuries it has, yet beckon Washington to find ways to cut the debt. And, since so far nothing it's done has helped the Main Street economy, it will keep right on doing it.

If Spin were Reality - We'd have a Recovery

Wouldn't it be awesome if spin could actually solve problems? Then, you could just say the word 'recovery' every time you gave a speech, ignore any negative data, assume the markets are up because of general economic health and not a mass infusion of cheap money, and it would be so.

It wouldn't matter that New Home Sales are at their lowest rate since reporting began in 1962.

It would be fine that Existing Home Sales (the number of completed transactions) were down 9.6% over the month, and 2.8% since last year.

It would be cool that Pending Home Sales were down 2.8% over the month, and 1.5% over the year.

It would be a symptom of recovery that the average Sale Price for non-foreclosed homes is $246,358  - below 2003 levels, and for foreclosed homes, is $169,965.

It would just be a coincidence that 39% of homes sold in February were distressed (sold at a discount), many of those to investors, not to end-home-dwellers, up from 35% last February.

It wouldn't have anything to do with people's housing situations, that Realty Trac, 'the leading foreclosure online market' maintains a top ten 'Hot' foreclosure property states list. (Ohio leads the list, with a 43% 'foreclosure savings' rate for 'investing' in a foreclosed property vs. paying up for a non-foreclosed one.)

You could be the Treasury department, and announce an 'orderly' sell program to get rid of 'up to' $10 billion per month of your $142 billion agency-guaranteed mortgage-backed securities portfolio (and yes, you would still be backing the agencies guaranteeing those securities which has nothing to do with propping up their value) - the one you bought as part of a multi-trillion financial market bailout, ur 'stabilization' program - when you became a hedge fund on behalf of the taxpayers. You wouldn't have to mention, ANYWHERE, IN ANY SPEECH, ANYTHING about the $4.1 trillion of Treasury and other government debt you issued since September, 2008, because, what's $4 trillion when you're stabilizing the market - on behalf of the taxpayers.

You could be a mega bank, with a CEO that is also a Class-A NY Fed director (or Jamie Dimon) and impress your new soon-to-be-higher-dividend-receiving shareholders, with your ability to reduce loan loss provisions, and it wouldn't have anything to do with accounting rules that don't require you to acknowledge the tremendous gap between the notional value of your loans, and their underlying collateral (the real home values) or Fed support.

You could be a mega bank (as say, above), pass your second stress test with flying colors, be assured by the Fed that no details of the test will be disclosed, and act coy about whether you want to disclose them or not. 

You could be the Fed Chairman, and disregard the idea of inflation, because if you don't count the cost of food or gas or health insurance or clothes or anything else sporting a price that has inflated, there is no inflation, and you can carry on buying, holding or subsidizing, the various forms of debt sustaining the 'recovery'.

Well, actually, if you looked at the housing market or the financial condition of the majority of borrowers, there wouldn't be any inflation. Maybe spin is reality. But, let me know if I'm missing something.