Today’s Fed action

William Polley has a good summary of the actions taken today by the Fed’s discount window. This is not bailout. It is a very short term (3 day!) loan that accepts MBS as collateral. Borrowers (i.e. BANKS!) have to pay the prevailing fed funds rate 5.25% on all borrowed money. The Fed will likely need to continue doing these operations until the liquidity returns to the MBS market. How long that takes is anyones guess.

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