...and teach all Fed officials to do just that. Your ‘proactive’ revival might just work for sometime, but it isn’t enough to clean-off the mortgage mess! Right, Henry?!
“Big Daddy” has done everything possible... from rate cuts & bailouts to granting a $168 billion stimulus package to contain the conflagration which is currently devouring the US housing and financial markets; how successful it’s been, is however questionable. First, the $30 billion Bear Stearns bail-out occurred. And then, the Northern Rock & IndyMac Bancorp disasters happened. Now, two mortgage giants – Fannie Mae and Freddie Mac are facing a common problem showcased in a unique wrap – both suffer from liquidity crunch (like their troubled predecessors) but at the same time are entities too big to fail, and collaterally, too big to rescue for the US Fed! To deal with this fiasco, the Fed expressed its willingness to follow a three-pronged approach [increase credit volume to government-sponsored entities (GSEs), authorise Fed to buy stakes in troubled companies, and finally, give Fed more authority to keep track of GSEs] to ensure reduced number of disasters in the future.
“Big Daddy” has done everything possible... from rate cuts & bailouts to granting a $168 billion stimulus package to contain the conflagration which is currently devouring the US housing and financial markets; how successful it’s been, is however questionable. First, the $30 billion Bear Stearns bail-out occurred. And then, the Northern Rock & IndyMac Bancorp disasters happened. Now, two mortgage giants – Fannie Mae and Freddie Mac are facing a common problem showcased in a unique wrap – both suffer from liquidity crunch (like their troubled predecessors) but at the same time are entities too big to fail, and collaterally, too big to rescue for the US Fed! To deal with this fiasco, the Fed expressed its willingness to follow a three-pronged approach [increase credit volume to government-sponsored entities (GSEs), authorise Fed to buy stakes in troubled companies, and finally, give Fed more authority to keep track of GSEs] to ensure reduced number of disasters in the future.
Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).
and Arindam Chaudhuri (Renowned Management Guru and Economist).
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