The Game is Over. There Won’t be a Rebound

… Michael Whitney: According to most estimates, the Fed has already gone through half or more of its $900 billion balance sheet. Also, according to the latest H.4.1data “the current holdings of Treasury bills is $25 billion. This is down from some $250 billion a year ago, or a net reduction of 90%.” (figures from Market Ticker) Doesn’t this suggest that the Fed is just about out of firepower when it comes to bailing out the struggling banking system? Where do we go from here? Will some of the larger banks be allowed to fail or will they be nationalized?



Michael Hudson: You need to look at what the Treasury as well as the Fed is doing. The Fed can monetize whatever it wants. And as you just pointed out in the preceding question, it’s been buying junk securities, leaving sound Treasury securities on the banking system’s balance sheet. Meanwhile, false reporting will help financial institutions avoid the appearance of insolvency.Government bailout credit will keep the big banks alive. But many small regional banks will go under and be merged into larger money-center banks