Bernanke May Run Low on `Ammunition' for Rates, Balance Sheet

[bicentennial_baby]

Source: Bloomberg

March 17 (Bloomberg) -- Federal Reserve Chairman Ben S. Bernanke may be running out of room to pump money into the financial markets and cut interest rates to rescue the economy.

The Fed has committed as much as 60 percent of the $709 billion in Treasury securities on its balance sheet to providing liquidity and opened the door to more with yesterday's decision to become a lender of last resort for the biggest Wall Street dealers. The central bank has cut short- term rates by 2.25 percentage points since September and will probably reduce them again tomorrow.

``They're using up their ammunition on the liquidity and overnight interest-rate fronts,'' said Lou Crandall, chief economist at Jersey City, New Jersey-based Wrightson ICAP LLC, a unit of ICAP Plc, the world's largest broker for banks and other financial institutions.

Traders today cemented bets that the Fed will cut its benchmark rate by an unprecedented 1 percentage point when policy makers hold their regular meeting tomorrow. Yesterday, in emergency decisions, the Fed lowered the separate rate on direct loans to commercial banks by a quarter-point, to 3.25 percent, and opened up lending at that rate to securities firms.

Read more: http://www.bloomberg.com/apps/news?pid=20601068&sid=aOv1UfsECliU&refer=economy

[swag]

1. Bernanke's following his old papers on Japan pretty well.

On the "conventional measures" front, he's starting to run out of some ammo. So he and his pals are taking a parallel track with unconventional measures.

We'll see how they do. Good article.

[bicentennial_baby]

2. Do you know what time to expect the announcement tomorrow?

:hi:

[swag]

4. 2:15 p.m. your time!

[Hydra]

3. The Fed isn't out of ammo

But they never had the will. They let this roller coaster occur deliberately...and a few days ago, I found out what they wanted- relaxed restrictions on them buying stock.

Just think- they could pull the money out of the air to buy things directly. Scary.

[Ichingcarpenter]

5. Here is a chart from the Federal Reserve showing how much ammo they have

http://research.stlouisfed.org/fred2/series/BOGNONBR

[whistle]

6. Hummmmm, $709 billion in treasury securities is a long long way from $750 TRILLION

...in derivative debts and SIVs which Alan Greenspan committed to and encouraged while holding the Federal Reserve Chairmanship position from 1987 through 2006. Yes indeed, he did encourage all of those derivative debt assets to be capitalized to fund the wars, the looting of the U.S. public resources and tax payer funded infrastructure, so BsuhCo cronies could steal the heritage of our children and our children's children and all future generations to come.

[Supersedeas]

7. if only someone at the Fed had some foresight -- 3.25 ain't bad, but watch'em drop it again