Mar

20

From this morning's WSJ item "Stepping Up to the Fed's Window":

The Fed is lending $95 for every $100 in securities that dealers bring to it, regardless of the type of collateral. In other words, the Fed requires the same amount of additional collateral whether a dealer is borrowing against a Triple A-rated corporate bond or a Triple B-minus subprime-backed bond.

Yes, those are termites you hear, gnawing at the Fed's balance sheet…


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  1. Curmudgeon 3256 on March 20, 2008 7:54 pm

    Perhaps Mr. Zachar is scare-mongering just a little bit. A triple B rating is still an "investment grade" rating. Putting the words "subprime backed" next to it (as the WSJ did) is a rhetorical device that will scare some people but does not modify the basic fact. The Fed lends only on investment grade collateral.

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