What are the rules for the fed taking on mortgages etc? I would want a max price of 80% of the value of the mortgage alongside the all proceeds portion so that banks can’t just make bad loans and then onsell them to tax payers
The Federal Reserve Board on Monday announced preliminary results indicating that the Reserve Banks provided for payments of approximately $97.7 billion of their estimated 2015 net income to the U.S. Treasury. In addition, the Federal Reserve transferred to the Treasury $19.3 billion from Reserve Bank capital surplus on December 28, 2015, which was the amount necessary to reduce aggregate Reserve Bank surplus to the $10 billion surplus limitation in the Fixing America's Surface Transportation Act (FAST Act). The FAST Act, which was enacted on December 4, 2015, requires that aggregate Federal Reserve Bank capital surplus not exceed $10 billion. The 2015 audited Reserve Bank financial statements are expected to be published in March and may include adjustments to these preliminary unaudited results.
The Federal Reserve Banks' 2015 estimated net income of $100.2 billion was derived primarily from $113.6 billion in interest income on securities acquired through open market operations (U.S. Treasury securities, federal agency and government-sponsored enterprise (GSE) mortgage-backed securities (MBS), and GSE debt securities).
that's too simplistic. the fed has wide latitude (probably too wide), but it should correlate with the (fuzzy, hard to accurately measure/model) productive capacity/velocity of the (globalized) economy, not just an unlimited well only constrained by inflation's devaluatory noose.
moreover, considering our technological progress and trajectory, i'd love to see us revisit the idea that money can only be injected into institutions (via central banks), which was a limitation of scope imposed by the practicalities of pre-21st century life. it's also a gatekeeper's gold mine on a no longer necessary choke point. we should move towards injecting money straight into the hands that create value, not into those of middlemen like bankers.
But from a practical, tangible, rubber-meets-the-road, this-is-how-they-do-it point of view when the Fed buys something, it pays for it by writing a new number in my Fed account. That new number is money.
So any time the fed takes on a debt made by a business at anything other than a discount the fed is bailing out bad business decisions, and that means the taxpayer is paying for it.
If the fed just “prints money” to cover those debts the real value of the USD collapses, and that hurts individual taxpayers more than the big businesses being bailed out.