Topic: Federal Reserve
Federal Reserve Bailout in Layman's Terms Most people fail to truly comprehend the current bailout of BIG business by the Federal Reserve. Read and Learn the truth!by Stephen Wood
(libertarian)
Thursday, September 18, 2008
If you are like billions of other world citizens, you might be concerned about the economy of your particular country.
Never fear, the Fed is here! The Federal Reserve announced today that they will be setting up a Relief Operation for poorly run businesses. Not just any poorly run business, but those businesses that are poorly run and who have sucked some of the members of the Federal Reserve in with them. You see, the Federal Reserve is bailing out only the biggest institutions, because that is where the Federal Reserve has their 401k plan.
You may be struggling to understand the current bailout, I shall clear that up forthwith.
Recently, I had a problem. I was about to be overdrawn in one of my checking accounts. I needed $500 immediately and it was 5 days until payday. In another out of state account, I had exactly .12 cents. So I, using the logic of the Federal Reserve, bailed me out.
I wrote a check from the out of state bank that had .12 cents in it. The check I wrote was for $500. Why would I write a check for $500 when I only had .12 cents in the account you might ask? Very simple. I needed the money.
Now I deposited this check into the soon to be overdrawn account and my bank immediately gave me a positive balance of $500. Real money, backed up by my personal check, wink wink. Then I overnighted a personal check from the newly replenished account to my account that was soon to be overdrawn by almost $500.
My .12 cent account soon showed a balance of $500.12. Neither check was good and both were fine. Why? Because the bank gave me credit for the checks and it would take 3-4 business days for the funds to clear and by that time, my paycheck would arrive to cover the transactions.
Why did I tell you this? Because this is the bailout in simple terms. The Federal Reserve has agreed to loan money that they just printed, (similar to my hot check for $500) anyway, they agreed loan to the businesses who had a bunch of worthless loans, (similar to my account that was about to be overdrawn) all the money that said businesses needed to appear solid as a rock again. In return, the Federal Reserve got to claim any one of several very important assests as collateral.
Assets used as Collateral in the Bailouts
Defaulted Loans - Listed as assets, but worth less than the stated value because they are listed at the loaned price rather than the market value, ie housing market. These include real estate foreclosures, business assets like staplers and paperclips and of course receivables, (the customers who couldn't pay on time)
With foreign banks - The Federal Reserve traded U.S. Dollars that they had just printed in return for that country's currency (that they had just printed) as collateral. So the asset guaranteeing those loans is the currency of each of the countries where the loan was made. We can rest assured that the currency that the Federal Reserve now holds from foreign banks is solid as a rock, because they are guaranteed by U.S. Dollars owned by those foreign banks.
So as you can tell, the Federal Reserve is taking care of business. The problem is that eventually, one of their paychecks isn't going to come in to cover the shell game they have been playing.
My financial advice to you? Always have at least two checking accounts! That way you can write hot checks from one to the other until your paycheck shows up.
And if you are ever questioned about your shady banking practices, don't hire a lawyer, just take a newspaper to court with you. Preferrably the financial section.
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The views expressed in this
article are those of Stephen Wood only and do not represent
the views of Nolan Chart, LLC or its affiliates. Stephen Wood is
solely responsible for the contents of this article and is not an
employee or otherwise affiliated with Nolan Chart, LLC in his/her role as a columnist.
Just because I am not going to do this- here is what I want- a service- much like my bank has now- that allows me to pay my bills online from my bank account. But since I do not trust the bank I use (Bank of America) or the bank I used to use (JP Morgan Chase) I will open at least 10 accounts, and I want my payroll divided between them 10% each. I want one or two accounts always with holdings in gold currency, and I want the rest in dollars or euros, for diversification.
Now I want to pay my bills in one place and I want that to draw from percentages across all my accounts (except maybe the gold) so that if a bank fails I can easily drop it- I might be lucky enough to get a FDIC check for my funds that I would otherwise forfeit and put those into a newly opened account.
My service takes care of all this for me. I hardly think about it.
When I use my ATM it has access to all my accounts and makes withdrawls in percentages of the total withdrawl from my accounts, so if I want $80, it draws $10 from 8 of my accounts. And it does all the currency conversion automatically for me. It even knows the spot price for gold if I want.
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