Remember when all of Wall Street nearly failed in 2008, and all the wonks on TV talked about all the “toxic debt” in the basement of our nation’s banks? You might have wondered: What are they going to do with all this toxic debt? Who is going to buy all this toxic debt from them?
The answer, of course, is the Federal Reserve. Not only has the Fed been buying mortgage-backed securities all these years, keeping the market flowing for these enigmatic securities – but now it’s buying more.
QE3 – or the Fed’s third round of massive bond buying known as “Quantititive Easing” – will involve the Fed buying $40 billion a month in mortgage-backed securities from banks – indefinitely.
The Fed’s plan to put billions more into the economy this way is just another sign that all is not well. The stock market and the economy is still on life-support.
Click here to read my column in The Sunday Wall Street Journal.