Are the Federal Reserve's stimulus programs creating another inflationary bubble? No. Federal Reserve Chairman Ben Bernanke has already started winding down many of the programs that steered the worlds' largest economy away from collapse. He also outlined a plan to absorb money the Fed pumped into banks since August 2007.
According to the Wall Street Journal, the Fed reduced TAF auctions from $100 billion per month in 2008 to $19 billion this month. TAF stands for Term Auction Facility and are short-term emergency loans the Fed made to banks to keep them functioning when they wouldn't lend to each other.
The Fed is also winding down the TALF program, which stands for the Term Auction Loan Facility that provides loans to non-bank businesses. TALF lent $350 billion a month to businesses when banks wouldn't. That's now down to $15 billion. TALF expires in June.
The Fed reduced loans to business through foreign central banks from more than $500 billion to $17 billion.
The Fed announced its stands ready to absorb the $1.1 trillion it lent to banks through a Certificate of Deposit (CD) program. Say banks do start lending again, creating inflation. The Fed can offer these CD's so banks can park the funds at the Fed, drying up the money supply and heading off inflation. The CD program won't be used until the recession is safely over, and inflation seems an imminent threat.
Related Articles
- Chronology of the Fed's Actions During the Recession
- How Inflation Impacts You
- How the Federal Reserve Works
Photo: Federal Reserve Chairman Ben Bernanke (Credit: Win McNamee/Getty Images)
Comments