Bernanke Speaks - It's Operation Twist

WASHINGTON (MarketWatch) -- The Federal Reserve on Wednesday said it will sell $400 billion worth of short-maturity bonds it holds and reinvest in bonds maturing between 6 and 30 years by the end of June 2012, confirming market expectations that it would revive the 1960s-era program dubbed "Operation Twist." By a 7-to-3 vote, the Fed also said it will reinvest proceeds from maturing mortgage-backed securities into mortgage-backed securities, instead of its previous practice to buy Treasurys with the proceeds. The Fed kept its target Federal funds rate between 0% and 0.25% and kept its pledge, first announced in August, to keep rates at exceptionally low levels through the middle of 2013. The Fed said that "economic growth remains slow" and inflation will settle at or below levels consistent with its dual mandate.

• NY Fed outlines what maturities it will buy

Comments

[Hal (GT)]

So what exactly does this do to help the situation? It's not an expansion of the balance sheet so it's not QE3. So they are just what? Holding their breath?

[Howard T. Lewis III]

Smells like a busy day at the catbox. Who is to say this worked at all, instead of the invention of another smoke-and-mirror device to make a positive balance appear to have been created ? 12 holes in the boat. 11 corks.

[DailyBail]

So what exactly does this do to help the situation? It's not an expansion of the balance sheet so it's not QE3. So they are just what? Holding their breath?

---

To be honest, there is nothing the Fed can do, short of major asset purchases (not twist), and that would have brought condemnation from Congress. There's nothing anyone can do, but wait. Housing bubble hasn't corrected yet, bank balance sheets are still ugly, consumer debt levels are still too high.

Five more years at a minimum to work off the housing shadow inventory.

[TR]

Housing's coming back (to the banks)

http://www.irvinehousingblog.com/blog/comments/bank-of-america-foreclosure-notices-increase-116-doom-spring-2012-rally/?source=patrick.net

I can't believe how slow people are.

http://boingboing.net/2011/09/19/americas-internet-service-slips-to-25-worldwide.html?source=patrick.net

[Joshua Gayman]

Sad that we are so aware of changes to our social media but clueless about our money which most of us "don't care about" yet are enslaved to. http://youtu.be/QxahtcEfHyw

[DailyBail]

Good clip Josh....keep them coming.

[Hal (GT)]

To be honest, there is nothing the Fed can do, short of major asset purchases (not twist), and that would have brought condemnation from Congress. There's nothing anyone can do, but wait. Housing bubble hasn't corrected yet, bank balance sheets are still ugly, consumer debt levels are still too high.

Five more years at a minimum to work off the housing shadow inventory.

----

Thanks for the reply.

So basically, we are going to have to hold our breath for years to come. I think you're right. 5more years minimum and likely many more than that.

Debt is going to choke us for years to come.