Recreating its backstops for money-market funds, commercial paper and asset-backed securities might require such stringent conditions that no one would participate.
Charles Goodhart, a member of the Bank of England's monetary policy committee, presented a controversial paper on asset prices at a Eurostat conference this week.
Known as conduits, these special-purpose vehicles borrow in the short-term, commercial-paper market to make acquisitions of highly rated paper in American asset-backed securities, and have been walloped by the plunging value of those assets since the frailty of subprime loans were exposed.
He gained fame in 1986 for coauthoring a paper pointing out that asset allocation, not stock picking, is the engine of portfolio performance.
In 1999, at the height of the bull market, he co-wrote a paper arguing that targeting asset prices when consumer inflation was low would tend to increase, not decrease, economic instability.
By providing liquidity to issuers of consumer asset backed paper, the Federal Reserve facility will enable a broad range of institutions to step up their lending, enabling borrowers to have access to lower cost consumer finance and small business loans.
My B paper could be the best asset class in 2011, bar none, worldwide.
Today the Treasury and the Federal Reserve are announcing a facility to finance the issuance of non-mortgage asset-backed paper in order to support lending to consumers and small businesses that is vital to our economy.
That is because MLPs distribute not only cash income but also paper write-offs for their asset depreciation.
The template is its September 19th announcement that it would finance banks' purchases of asset-backed commercial paper from money-market funds.
The hope is that investors will buy into this fund, and it will unfreeze the short-term asset-backed commercial paper market.
The Federal Reserve responded with several programs, including a facility to finance bank purchases of high-quality asset-backed commercial paper from money market mutual funds.
No. 12, "speculative areas beyond housing may suffer in 2007, " has commenced with the evaporation of the asset-backed commercial paper market last summer and the drying up of private equity financing.
But it is too soon to tell whether the vehicle will ever be restored to its former pre-credit-crunch glory, when it was able to issue short-term commercial paper to fund its investments in asset-backed securities.
Moreover, providing liquidity to financial institutions does not address directly instability or declining credit availability in critical nonbank markets, such as the commercial paper market or the market for asset-backed securities, both of which normally play major roles in the extension of credit in the United States.
Turns out that the Primary Fund, like many other money market funds, made significant investments in asset-backed commercial paper (ABCP), which offered juicy yields, but did so because they were backed by things like mortgages, auto loans, credit card receivables and other risky assets that, despite their risk, came with investment-grade ratings.
For this reason, ad hoc responses will still be critical, such as last week's federal guarantees for money-market funds, Fed loans to banks to buy asset-backed commercial paper and, on Sunday, approval of the remaining two big independent investment banks, Morgan Stanley and Goldman Sachs, to become Fed-regulated bank holding-companies whose investment bank units can now borrow from the Fed on the same terms as other banks.
This is clear from the performance of the commercial-paper market, another short-term asset class that rarely hits the headlines, where rates suddenly hit six-year highs last week.
For some banks, the combined issuance of asset-backed securities and commercial paper (short-dated securities) amounted to about half of all their loans.
Given that bonds usually fall when inflationary pressures rise, this suggests gold has not been playing its historical role as an asset for investors who believe that paper money will inevitably be debased.
The facility will buy unsecured and asset-backed three-month commerical paper directly from eligible issuers.
The Fed will buy unsecured and asset-backed three-month commerical paper directly from eligible issuers.
The facility will buy unsecured and asset-backed three-month commerical paper directly from eligible issuers, and the Fed will lend funds to the vehicle at the the target Fed funds rate.
Finally, its support of the financial system with massive asset purchases in frozen markets, including commercial paper, mortgage backed securities, and currently Treasury notes.
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So paper issued by insurance companies themselves generally isn't popular with asset managers at other big insurers, who don't want to subsidize rivals.
Bank stocks sold in single digits, which is where we all believed they belonged, at net asset value adjusted for Third World loans and sour real estate paper.
Lawyers for IBRC argued that the assignment was a sham, part of an asset-stripping exercise carried out at a massive undervalue and not worth the paper it was written on.
Mr Bernanke wrote another paper with Mr Gertler arguing that central banks would do better not to try to stabilise asset prices but instead to concentrate on a target for consumer-price inflation.
If all the issuers of paper money want to see their currencies depreciate, then the only answer is to own an asset that central banks cannot debase namely, gold.
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