Thursday, September 22, 2011

Fed's QE3 "the Twist" still ignoring TBTF Banks 2008's multi Trillion $ difference between Legal title and Equitable title to Assets; aka LEVERAGE

The Fed's 2011 QE3 called "Twist" (is a re-incarnation of the 1960's Fed Twist so named because Chubby Checker's song was the hit of the day) is yet another failed and failing attempt by Mr Bernanke to rejuvenate and re-liquify TBTF bank's assets back to life. Like previous "programs" failures is like the Fed pushing on the proverbial string.

As we wrote in 2007:
"Cash infusions by operators, sponsors, market rescues, liquidity by the Federal Reserve bank through discount rate cuts, extended rollover provisions, open market operations band aid liquidity only; Fed action does not cure the credit (or credit worthiness) and or valuation issues surrounding these securities" never has and never will.

QE3 is yet another attempt to game, excuse me fix what's wrong on Wall St in the hopes it shows up in increased final demand; it's remotely possible in textbooks but unlikely.

Final demand, writ large, has been replaced by necessary versus nice for some time now; except for the lucky beneficiaries of Mr Bernanke's previous rescue attempts.

Not for nothing, but the Fed is somewhat conflicted in this endeavor as well - because it (QE3) is also supporting valuations for the $1Trillion of MBS it holds (renting) on its balance sheet too, acquired from the TBTF banks for 100 cents CASH on the dollar in 2008/9.

Although a persistent one, when will Mr Bernanke awake from his intellectual slumber and finally recognize that markets need to clear - sometimes at and in this case, distasteful prices. But there's no denying that the market now or will eventually know best; and then it likely won't be a string...

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