"The Fed" and recent actions

There are very few of us who are not aware that we are in the midst of a full-fledged housing crises, commodity prices are inflating at record paces, and a recession is looming on the horizon. Some of this is arguably caused by the Fed's recent actions, and these actions were taken to avoid a recession and/or repair the housing crises. What have these actions been? Let's look at that.

1. The Federal Reserve has lowered short-term interest rates drastically in the past six months. This has reduced the cost of credit to banks, but they've pocketed the reduced cost as additional profits. See more here.

2. The Fed has reduced reserve requirements for large mortgage buyers Fannie Mae and Freddie Mac. This will increase the money supply by about 200 Billion. See more here.

3. The Fed has accepted illiquid bad debt (mortgage, auto, and credit card) in exchange for liquid Treasury Bills. See more here.

4. The Fed provided the financing for the recent bailout of Bear Stearns to J.P. Morgan. Countrywide is next, I believe, when Bank of America walks away. See more here.

5. The Fed Chairman, Ben Bernanke, has recently acknoledged legislation proposed by House Financial Services Committee Chairman Barney Frank, D-Mass. This legislation will provide 300 Billion in FHA financing for distressed homeowners. See more here.

Given these five items, it's clear to see that the mortgage crises is real and being addressed on all fronts by the Federal Reserve with not only the help of investment banks in the business sector but also Congress in legislative reforms as well as new FHA funding.

These actions, arguably, will not only lead to inflation, but could also give banks the wrong idea that should they mistep in funding poorly structured debt obligations, then they can always get a government bailout, and throw it back on the taxpayer, and pocket the short-term profits. I am pleased, however, to see that Chairman Barney Frank has encouraged these banks (who issued asinine mortgage products in the first place) to write down principal or else....and he means it.

(For those of you who think that executives in these investment banks that issued the debt in the first place are not partially to blame, see here, or try here, or this one is definitely tabletalk, and here's one that'll surely get you going!)

Ultimately, this will be one for the history books. People can blame the Fed all they want, and I myself find quite a few bones to pick. But, it's hard to be proactive in such a situation that Chairman Ben Bernanke has been handed. Sure, there are things that (hindsight will prove) could have been done better. And, there are other things that (again, thanks to hindsight) should be done but won't...but hindsight is always 20/20 and we just don't have that luxury.

History will prove that many of these greedy and selfish bank executives produced these debt obligations only to line their own pockets with a cadre of legal teams backing them.

History will prove that the more complex something is, the less you should invest in it....chances are, the ones who created the debts did so in order to personally profit without thought of the ones buying the debt in the end.

History will prove that the American Executive Board needs to read Proverbs, Ecclesiastes, and the part in Nehemiah where the "banks" were charging usurious interest rates to the locals...and then, reread it all over again.

Lastly, if you feel any anymosity towards the creators of these debt vehicle, remember, whatever you could wish for them pales in comparison with what God has in store.

Cheers, friends.