Wednesday, June 29, 2011
Fed extends dollar swap lines to foreign central banks--AGAIN!
Here's the article.
The Fed is at it again. This is like the fourth or fifth time in the past three years that the Fed has come to the rescue of foreign banking institutions and corporations. By instituting dollar swap lines the Fed provides dollar based liquidity to foreigners who are short dollars and need to make good on their dollar denominated obligations. In return the Fed assumes unlimited risk on this position.
The Fed doesn't have to do this. Central banks of these respective countries and trade zones could provide dollars buy selling their domestic currencies and buying dollars in the foreign exchange markets. But, heaven forbid, that would mean weakening their currencies and making the dollar stronger! So instead of doing that the Fed REMOVES that potentially huge dollar bid. And this comes from Bernanke, who recently talked about wanting a strong dollar??? Unbelievable.
Most shocking, however, is the fact that there is no outcry from Congress or any policymaker that has been complaining about the weakness of the buck. None whatsoever. Where are they?