Do we even know *from who* the FED is buying ABS ? Or is this still in the dark, 'we can't say' bs. FDIC Friday is still going strong. Lots of bank closures. Guess those small fish weren't big enough to get FED help ? = Picking winners and losers.
Bill Gross is quoted in this week's Time as being a seller of MBS over the past months. So there's at lleast one guy from whom the Fed is buying.
Huh? I am somewhat shocked at your ignorance. Information on the Fed QE programs is publicly available, so why not avail yourself of it and clear up your misconceptions... The Fed is buying Agency MBS (not ABS) from the mkt. The rules that govern the process (conducted by two external managers, BlackRock and Wellington, I think) is described in detail in several NY Fed's publications. As to who the money eventually goes to, given that this is "Agency" MBS, the answer to this question should be rather obvious. If it's not, you can read about the process by which MBS are created. Finally, what does the MBS program have to do with small banks closing because they couldn't get Fed help? Especially, in light of the fact that among the closing banks are ones that DID get US Treasury help as part of TARP.
Woa. Slow down there ! ABS is a generic term that refers to a broad swath of debt products - including mortgages.! That's why the acronyms first word is "Asset". DUh!@ Are you gonna be a pedantic ninny all day? As for the rest of it, you never answered my original question. FROM WHO is the FED buying these Asset Backed Securities? How do you know the FED ONLY buys Agency MBS? HOW. There's a gigantic black hole on the FED's ledger, and that's WHO got the bailout money ! Why is that important? It's called picking winners and losers.
Understood, you used ABS in a collective sense. That's confusing, as it's not what's normally used in the mkt (ABS and MBS normally are used to refer to two very different asset classes), but that's fine. I'll stop being a pedantic ninny, if you promise to stick to conventions. The Fed is buying these securities from the mkt. Specifically, let's say I am a mkt participant and I happen to own $1bn Ginnie II 4.5% 7/39s that I am willing to part with. I call one of the primary dealer banks and I tell them to offer my yard of GNMA to the Fed at their next op. If the price is right, I end up with no Ginnie but lots of cash, while the Fed ends up with less cash, but $1bn of GNMA II 4.5% 7/39s. Now you're right, since I didn't personally hand the paper over and didn't actually watch Ben lock it in his big vault, I have no way of being absolutely certain that the Fed's been buying MBS. Similarly, I have no way of knowing, for example, that the planet Earth is, in fact, round. It's certainly possible that the whole money mkt is one big hoax that's been perpetrated by the Fed et al throughout all this time, just like it's possible that astronomy and physics and photos of Earth from space are also a hoax. The probabilities we each assign to these scenarios is based on our individual preferences. In seriousness, I don't know where you get this notion of black hole. You can see exactly which MBS the Fed holds if you look on the NY Fed's website. There's an XLS file that lists amounts held of each security by ISIN. Furthermore, since these are agency MBS, you can look at the prospecti and see the general descriptions of pools that went into each ISIN. You can see where the mtge came from, which bank originated it, i.e. where the money ultimately goes. All these MBS holdings add up to the amounts shown by the Fed balance sheet in the H.4.1 table. I would love to understand at which specific stage of the process described above you see a possibility of some sort of foul play. How, specifically, would the conspirators conceal from the entire mkt that trades these securities (keeping track of the free float, the issuance patterns, etc) that the Fed has actually not transacted the way it claims it did? Furthermore, are you saying that you want disclosure of who actually sold their MBS to the Fed? Why is that something that you feel is appropriate? If I buy $1mln USTs tomorrow through my broker, would you expect me to be able to tell you exactly which dealer filled my broker and who the dealer got their bonds from? Treasuries and MBS are fungible, after all...
Martinghoul.. I've been a fan of your richness of knowledge for a while. You're one of the only contributors here who has that. Curious, did you ever get a CFA?
Thank you, scriabin... I never did a CFA. To be honest, I never really wanted to know any of this. Myself and many other people thought that the money mkts were a sleepy boring place where nothing ever happened and things just sorta hummed along. However, when the world went to hell in 2007, I had to learn all this crap in a hurry. Result: lots of all-nighters, many painful memories, lots of (probably) useless trivia, but no CFA.