They arent printing money and they arent rhrowing it away. The banks have treasury bonds that mature over a time period. The banks need cash now so they exchange the bonds with the fed for cash as a short term loan that must be repaid in 24 hours plus interest which in this case will be somewhere around a 1billion. Once they repay the fed they get their bonds back.
Then the fed has their bonds for 1. Two the fed runs banking if the banks dont pay the fed back the fed take sthe bank. The money never hits circulation. The fed could put 10trillion into the repo market and it would do nothing to inflation. The money is go e within 24hrs.
You don't think the banks will fail if no one has any money to put in them or pay for overdraft fees?
If unemployment hits 20% like Mnuchin just suggested it could, we're going to have a much bigger problem than just failing banks.
Folks stressed over student debt, shit paying jobs, and lack of a healthcare system here in the US (don’t call what we have a “system”-it’s a gun to your head: “pay us for your medicine or stay sick/develop complications/die”) and yet we can give billions to keep the stock market afloat so rich people don’t lose a ton of money.
Rugged capitalism for the have nots, and socialism for the haves/corporations.
It’s not exactly easy to see what’s going on. I’ve had to read through some shit tonight to understand this was a necessary move. I fucking hate people who don’t take the time to even try, but I kinda get it.
The fed dropping interest rates like it did, pulling one of the last levers they have to pull us out of the recession at the tail end of this, just seems like a bad idea. Some people see this line of thinking in other threads, and then apply that same logic here. Still though, they profoundly misunderstand what the fed can do lmao. It’s like some people think they are the ones who can freeze debt payments.
I think what might be happening is people seeing the senate and congress shitting the bed on making sure the average joe can survive, and are just lashing out at any part of the gov. It’s dumb as fuck, but it’s semi reasonable behavior if guess.
Banks need cahs and have their money in treasury bonds. The banks are exchanging their illiquid treasury bonds for liquid cash. The banks have 24 hrs to repay the fed plus interest or else the fed keeps the bonds.
They dont have enough cash hence the fed doing this. The banks exchange $500billion in illiquid treasury bonds for $500billion in liquid cash. The banks then have 24 hrs to repay the fed $500billion plus about 1billion in interest. If the banks dont pay it the fed keeps the bonds.
It is working out great. It allows banks access to cash which in turn means you can go buy groceries or withdraw from an atm or cash your paycheck. The banks are exchanging their illiquid treasury bonds for liquid cash with the fed. The banks have 24 hrs to repay the money plus interest or else the fed keeps their treasury bonds.
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>offer up their own businesses as collateral
Treasury bills. ***Way*** more stable that shares of their business.
> six months
Typically 1-7 days depending on the exact repo deal.
But otherwise yeah. This isn't as big a deal as people on Reddit act.