Mark Thoma http://economistsview.typepad.com/economistsview/2010/01/links-for-2010-01-21.html links to a story from the WSJ entitled "Fed to End Overseas Dollar 'Swaps'-WSJ.com. It reports that as of Feb. 1 the Fed will have unloaded all of the nearly $500 billion in foreign currencies, mostly euros, that it obtained through swaps in its massive increase in its balance sheet in Fall 2008. That reportedly was used to hold all kinds of horrendous eurojunk coming out of the AIG collapse. It was the worst stuff on the balance sheet, most probably. Now it is about to be gone.
Of course they have replaced it with US mortgage backed securities that do not look so hot, although they are promising to stop accumulating those in March. If that does not work out, could trigger the dreaded second dip.
1 comment:
Still, they paid for all that with money that is even less than a subprime MBS that sells 3 cents on the dollar ... What’s wrong with Economics?
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