Subprime

How does Fed ‘inject’ money into the system? 

 fatcat

The media is parrotting the term “injected liquidity” this week.  It means that the US government spent $38 billion of your money on bonds backed by subprime mortgages.

Subprime means that the people that took out the mortgages have lousy credit and probably can’t really afford the houses they’ve bought. It is likely that the U.S. government will take a huge loss on these bonds – it is a purposely stupid investment. So your tax dollars are being used to bail out a lot of big (read: rich) investors who knowingly made extremely risky (read: greedy) investments.

from the msnbc article:       

Until the Fed stepped in, there were virtually no buyers for these things, because investors have all but given up trying to figure out what — if anything — they’re worth. Until it’s clear how many more mortgage holders are going to default on their loans, it hard to know where things will shake out. But, based on recent sales, it turns out these bonds may be worth as little as a third of what they were supposed to be worth.

Whose fault is it? If you voted for the current president or senators who approved his appointments to the Fed, well… it’s your fault.

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