Fed to Pump Another $100 Billion into Financial Markets

On Friday, the Federal Reserve scheduled two more $50 billion auctions for April - one on April 7 and one on April 21. This is under its Term Auction Facility, which provides 28-day loans to banks who may not want other banks to know they need to use the Fed's discount window. This could be seen by the banking community as a sign that they have a lot of subprime mortgage debt on their books. (Source: Federal Reserve Press Release, March 28, 2008)

This will bring the total to $830 billion that the Federal government is pumping into the financial markets as a result of the Subprime Mortgage Crisis and resultant Federal Reserve and the Banking Liquidity Crisis. For a run-down of the other $730 billion, see Regional Banks Will Pump Another $100 Billion into Mortgages

What It Means to You

In all likelihood, the Federal government's actions have avoided a financial meltdown. Although it is possible that the economy is already headed for a recession, it will be less painful than if the government had done nothing.

However, if Fannie Mae, Freddie Mac, the Fed and the Federal Home Loan Banks get stuck with the $830 billion in bad debt, then this will cost taxpayers almost eight times as much as the Savings and Loan Crisis, which "only" cost the taxpayers $124 billion.

Even if this worst case scenario does occur, the net result is that this debt would get added to the $9 trillion national debt. This would contribute to a chronic situation that continues to depress the dollar and raise the price of imports.

For those homeowners that are facing foreclosures, the Fed has a list of resources on its web site at Foreclosure Resources for Consumers.

Related Articles

• Fannie Mae, Freddie Mac and the Subprime Mortgage Crisis
• Secondary Mortgage Market
• Subprime Mortgage Crisis Looking Even MORE Like the Savings and Loan Crisis