Friday, December 19, 2008
Fed's foreign currency position rises $14 billion in latest week to $642 billion
Over a three month period the Fed's foreign currency holdings have gone from virtually zero to over $600 billion. Foreign currencies now comprise the largest single asset holding on the Fed's balance sheet. This accumulation has gone on virtually unnoticed. No one in the media or in Congress has asked about this.
The accumulation of foreign currencies have been negative for the dollar. These currency holdings also represent loans--in the same magnitude--to foreign central banks that are being used to fund foreign institutions. Neither the Fed nor the Federal Government has any oversight on these loans. Who are they going to? What collateral is being pledged? We know nothing.
It is highly likely that some of this money has gone to foreign automakers like BMW, Daimler, Volkswagon, Nissan, Toyota, Honda, Hyundai, Kia, etc. And for sure a big chunk of this money has gone to foreign banks and financial institutions.
As the debate rages on in America as to whether or not we should help our own businesses, the Fed is quietly lending money to foreign companies in amounts greater than what has already been spent through TARP.
It is an outrage!
The American electorate, and especially American workers who have recently lost their jobs, should be up in arms about this. Instead, we see near-universal-opposition to the token loans (with huge strings attached) that are being given to companies like GM and Chrysler.
Unless we wise up and complain about the right things, we will continue to see policy that is counterproductive and fashioned, by design, to make Americans poorer vis-a-vis the rest of the world.