Update on Fed’s intervention

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When we reported last week on the Fed’s attempts to pump liquidity into the financial markets, we quoted two news organizations reporting that the Fed had purchased mortgage-backed securities, or MBS’s.

In the interest of setting the record straight, we note that Calculated Risk -- an excellent blog on economic issues, btw -- reports that, technically, that’s not exactly what the Fed did: ...’the Fed didn’t buy ‘billions of dollars worth of crumbling bonds’. The MBS is just put up as collateral, and unless the banks go under in 3 calendar days, they will pay the loan back with 3 days of 5.25% interest. No big deal.’

More: ‘Technically the legal ownership of the collateral apparently does change hands, so saying the Fed is ‘buying’ is not completely inaccurate - just misleading.’

We stand corrected. Or rather, we stand clarified. We also pass along this update, from CNBC: more intervention today by the Fed, the European Central Bank, and the Bank of Japan.

Hat tip: Westside Bubble
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