Fed Still Has Ammunition
by Sean Hackbarth
Even with all the money its lent to banks and securities firms the Federal Reserve still has $500 billion in treasuries if the financial crisis worsens. But what if $500 billion isn’t enough? The Wall Street Journal’s Greg Ip finds the Fed could ask the federal government to issue more debt than it needs. The Fed would end up buying the extra debt. Another option is the Fed issuing its own debt. Another option is the Fed paying interest to banks for funds held by the Fed. Or if the Fed wants to get really complicated it could offer up the mortgage-backed securities it’s taken as collateral from financial firms and use them to get treasury bonds in return.
“What Could the Fed Do?”
