More Credit!

As if to mock my claim yesterday that you can’t solve a problem of excessive credit with MORE credit, the Federal Reserve today announced some new programs which aim to free up more credit!
The Fed said they’d buy up to $500B (that’s BILLION) in mortgage backed securities, and $100B in direct debt from Fannie and Freddie. They also said they’d spend $200B on asset backed securities to ease credit to small businesses, student loans, auto loans and credit card loans.
As I’ve said many times, the housing bubble was caused by an over-availability of cheap credit, yet the Fed’s solution to the problem is more of the same. In their own words:

“This action is being taken to reduce the cost and increase the availability of credit for the purchase of houses, which in turn should support housing markets and foster improved conditions in financial markets more generally.”

Good luck with that. Hey, mortgage rates had their biggest drop ever today – I guess that means the Fed is brilliant (sarcasm). In the words of a commenter on the NY Times’ article on the Fed program: “I guess I’m having a little bit of a problem understanding how more credit is going to help people who don’t have jobs and owe $250,000 on a house that isn’t even worth $150,000. Can someone kick me down some knowledge?”
I sent Bones this video today, with the subject line “insta-fav”

But he replied with this video, which is a tremendous take on the classic iconic 1980’s A-Ha video: Take On Me. This is great stuff: The Take On Me Literal Video Version

-KD

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