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Banking, finance, and taxes

FOMC Massively Gooses Gov’t. Balance Sheet

Photo of Douglas A. McIntyre
By Douglas A. McIntyre Updated Published
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The FOMC has come in with no rate change as we had expected.  When it is already at a near-zero rate policy, there was no other outcome.  The Fed Funds Target Rate was left at 0.00% to 0.25%, and the discount rate was left at 0.50%.  But where this gets interesting is the amount that the Federal Reserve is increasing the balance sheet via massive securities purchases.  Ben Bernanke is about to inject a massive amount of additional cash into the system.

The Fed will buy an additional $750 billion worth of agency mortgage backed securities.  It will also purchase an additional $100 billion in agency debt instruments, and it will purchase an additional $300 billion worth of long-term Treasury securities over next 6-months.

The FOMC has also pledged to keep Fed Funds at exceptionally low levels for quite some time.  It said that the economy continues to contract and the near-term is weak.  The Fed also sees a gradual resumption of sustainable economic growth and inflation should be subdued.

The magnitude here is that the mortgage backed security purchases are now more than doubled.   Equities have launched as a result with the DJIA up 120 points to over 7,500 and the S&P 500 now up 37+ to 1499.  Treasury yields in 10-year and 3-year notes have tanked as bond prices have gone up.  The dollar has also tanked, and gold is up higher as a result.

The inflation mongers will be out in full force by tomorrow morning.

JON C. OGG

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About the Author Douglas A. McIntyre →

Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.

McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.

His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.

A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.

TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.

McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.

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