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Fed Grapples With a New Risk Reality

Wall Street Journal Original article ›

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The Fed over the past year has assumed, backstopped, or committed to take on about $2 trillion in assets from shaky financial institutions including Bear Stearns, AIG, Citigroup and Bank of America. In some cases the banks will assume some of the losses, or Treasury will accept some of the losses before the Fed comes into the picture. Another $1 trillion in lending could occur in 2009 as liquidity programs are tapped further by borrowers and the Fed purchases more bonds such as the ones sold by Fannie and Freddie, and securites backed by student loans, auto loans, credit card receivables and small business loans. This would result in a balance sheet for the Fed over 3 times what it was 18 months ago in mid 2007.

Evidence of "Too Big To Fail" in the US Federal Reserve's 2008 Bailout Files

01/20/2009

Grouped Articles

GE Capital, AIG to Get More Government Oversight

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We’re All Still Hostages to the Big Banks

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The Fed's Bailout Files

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Foreign Firms Received Funds

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Hedge Funds Tapped Rescue Program

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Liquidity Facility Was Lifeline for Wall Street

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Hedge Funds and the 2008 bailout by the U.S. Federal Reserve

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Grouped Articles

Hedge Funders Are All a Little Nuts

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Hedge Funds' Investing Prowess Doesn't Live Up to Billing

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Many TALF Investors Wealthy and Unknown

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Fed Lending Benefited Banks Far and Wide

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In Lieu of Bailout, a New Strategy

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The bailout and the Federal Reserve's infusion of cheap money are having unintended effects.

01/20/2009

One impact is that a few securties firms are making large profits even as the smaller banks are failing, banks like Citigroup and Bank of America are suffering losses, and the banks that were "too big to fail" are actually becoming larger. The Fed's infusion of money is not helping small and medium sized businesses with credit, as the smaller banks that lend to these businesses -as Ms. Lee points out- are not getting credit and are laying off people. This is setting off a vicious cycle of shrinking employment and shriking consumer demand.

Grouped Articles

How the Fed Can Avoid the Next Bubble

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Taking the National Debt Seriously

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Steven Pearlstein - Don't Reinflate the Old Bubbles

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Financial-Services Regulation Fuels Tiff

Wall Street Journal 10/14/2009

That Promised Financial Reform

New York Times 10/14/2009


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