Wheels

Wish you’d never even loved me/ Makes it so hard to live without love now.

What a song. She may as well rip out her heart and throw it on a charcoal grill. Lone Justice:

Helicopter Ben’s QE3

At this point, I think anything that the Fed does is like voodoo. It almost doesn’t matter if it works, as long as the market thinks it does:

The Federal Reserve said it will expand its holdings of long-term securities with open-ended purchases of $40 billion of mortgage debt a month in a third round of quantitative easing as it seeks to boost growth and reduce unemployment.


“We’re looking for ongoing, sustained improvement in the labor market,” Chairman Ben S. Bernanke said in his press conference today in Washington following the conclusion of a two-day meeting of the Federal Open Market Committee. “There’s not a specific number we have in mind. What we’ve seen in the last six months isn’t it.”


Stocks jumped, sending benchmark indexes to the highest levels since 2007, and gold climbed as the Fed said it will continue buying assets, undertake additional purchases and employ other policy tools as appropriate “if the outlook for the labor market does not improve substantially.”


Ezra Klein seems to think the new round of quantitative easing from the Federal Reserve is a BFD, and will send an encouraging signal to the markets:

The Federal Reserve’s announcement Thursday is a big deal.


It’s a big deal because of what they’re doing. They’re buying $85 billion in assets every month through the end of the year, and then they’re potentially going to keep doing it in 2013. They’re promising to keep interest rates low through the recovery, and then keep them low after the recovery strengthens.


But it’s a bigger deal because of what they’re saying. Thursday, the Federal Reserve said, finally, that they’re not content with 8 percent unemployment and a sluggish recovery, and they’re willing to actually do something about it. If you’re an investor or a business owner trying to decide what the market is going to look like next year, you just got a lot more optimistic.

That’s the weird thing about the Federal Reserve. We don’t just care about what they do. Because their power is so vast — the ability to make as much real, American money as you want is quite a superpower — we care about what they want in the future. And, until Thursday, we weren’t getting much clarity on what they wanted in the future, or how far they were willing to go to achieve it.

Ian Welsh says no, it won’t help the people who need it the most:

The Fed has announced its third quantitative easing program. To state what should be obvious, the effect on the economy for ordinary people will be minimal, as with QE1 and 2. It will help banks, financial firms most, other large corporations will also benefit. If you work at the executive level in one of those organizations, it will help you and raise your salary or bonuses. It will not significantly raise demand for goods and services and will not do much for the rest of the economy. Remember, 93% of the gains of the Obama recovery went to the rich, and that was not by mistake.

Atrios is not quite as gloomy as Ian, but close:

So we’re going to have more goosing of financial asset prices. Bernanke said something about how we’ll all go spend money when we see that our 401Ks are doing better. So a lot more money for rich people, a tiny bit more for some of the rest of us, and some hopey that it causes the economy to go WHEEEEEEEEEEEEEEEEEEE.

Wheee

Rebuilding the Big Shitpile! See what letting bankers off the hook gets us?

Starting next year, new rules designed to prevent another meltdown will force traders to post U.S. Treasury bonds or other top-rated holdings to guarantee more of their bets. The change takes effect as the $10.8 trillion market for Treasuries is already stretched thin by banks rebuilding balance sheets and investors seeking safety, leaving fewer bonds available to backstop the $648 trillion derivatives market.

The solution: At least seven banks plan to let customers swap lower-rated securities that don’t meet standards in return for a loan of Treasuries or similar holdings that do qualify, a process dubbed “collateral transformation.” That’s raising concerns among investors, bank executives and academics that measures intended to avert risk are hiding it instead.

Adding to the concern is the reaction of central clearinghouses, which collect from losers on derivatives trades and pay off winners. Some have responded to the collateral shortage by lowering standards, with the Chicago Mercantile Exchange accepting bonds rated four levels above junk.

“We just keep piling on lots of operational risk as we convert one form of collateral into another. The dealers look after their own interests, and they won’t necessarily look after the systemic risks that are associated with this.”

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