Thursday, December 13, 2012

No Buyers

Apparently the Treasury still can't get enough suckers to buy its worthless bonds, so the Fed will continue to buy them. (Story here).
In its statement, the Fed said it will also keep spending $85 billion a month on bond purchases to drive down long-term borrowing costs and stimulate economic growth.

The Fed will spend $45 billion a month on long-term Treasury purchases to replace a previous bond-purchase program of an equal size. And it will keep buying $40 billion a month in mortgage bonds.

Those purchases, and the Fed’s commitment to low rates, are intended to spur borrowing and spending in an economy still growing only modestly 3½ years after the Great Recession ended.

. . . With its new purchases of long-term Treasurys, the Fed’s investment portfolio, which is nearly $3 trillion, will swell to nearly $4 trillion by the end of 2013 if its bond purchase programs remain fully in place.
So, indirectly, U.S. banks are (or will be) the major holders of U.S. debt. (It's apparently hard to verify which banks are shareholders and what percentages they hold, but the nationally chartered banks in each region are required to become shareholders when they joined the Federal Reserve, while state chartered banks may become members under certain circumstances.) (See here for a fuller discussion of the ownership issue, including debunking some popular conspiracy theories). (See also here).

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