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Five Things You Need to Know: Federal Reserve to Expand Lending

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The banks have their lender of last resort (the Federal Reserve), and we consumers have ours (credit cards).

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Kevin Depew's daily Five Things You Need to Know to stay ahead of the pack on Wall Street:

1. Federal Reserve to Expand Lending

WASHINGTON, DC - The Federal Reserve, the nation's fastest-growing operator of short-term payday lending branches and distressed securities pawnshops, said this morning it plans to expand from 12 regional branches to as many as 260 locations throughout America by year's end.

The expansion is expected to cost between $750 billion to $1 trillion and will increase the types of items eligible for pawning at Federal Reserve locations. In addition, each new Federal Reserve branch location will include video lottery terminals, slot machines and a gift shop.

The Federal Reserve said the expansion plans will be dilutive to Fiscal 2008 earnings, but result in a more stable and diverse operating base for the company longer term. Meanwhile, as part of an aggressive marketing campaign to announce the new branches, the Federal Reserve said it will produce unlimited quantities of scratch off lottery tickets (formerly known as dollars) redeemable for prizes and eligible for use as collateral at foreclosure auctions.

2. Fed Unveils New Acronym to Fight Debt Crisis

The Federal Reserve, coordinating with the central banks of England, Europe, Switzerland and Canada, today announced a significant expansion in the loans of cash and securities it will make available to banks and broker dealers.

The Federal Reserve plans to lend up to $200 billion of Treasury securities in exchange for debt including private mortgage-backed securities, the central bank said. The new program, called a "Term Securities Lending Facility" (TSLF), will allow the 20 primary dealers to borrow Treasuries in exchange for Fannie Mae (FNM) and Freddie Mac (FRE) backed bonds and mortgage-backed securities and even mortgage-backed securities that are not backed by Fannie and Freddie as long as the debt is "rated" triple-A.

The TSLF auctions will be conducted weekly beginning March 27.

3. Most Misleading Headline of the Day

From USA TODAY

Hmm, not exactly. In fact, rather than describing the action, that headline actually points out the problem. Going back to August, the Federal Reserve's attempt to provide liquidity has not made it into the economy. The money the Fed is injecting is simply being absorbed by the weak balance sheets of banks and financials. If it were actually making it into the economy we wouldn't be having this crisis right now... we'd be having it next year.

4. Credit Cards: Lender of Last Resort

We're seeing the following items hitting the wire from MasterCard (MA) CEO Robert Selander:

  • MASTERCARD SEES CHANGE IN MIX OF CONSUMER SPENDING
  • MASTERCARD SEES MORE SPENDING ON GAS, GROCERIES
  • MASTERCARD SEES SLOWER CONSUMER DISCRETIONARY SPENDING

Fair is fair. The banks have their lender of last resort (the Federal Reserve), and we consumers have ours (Credit Cards).

5. Deflation, Deflation, Deflation! (Was: Location, Location, Location!)

A Minyan forwarded us this latest signpost along the real estate bubble collapse road (see below). Gotta hand it to them, these Realtors are nothing if not relentlessly optimistic.

GET THESE INSIGHTS AND MORE IN REAL-TIME. CALL 212-991-9357 FOR A 14-DAY FREE TRIAL TO THE BUZZ & BANTER OR CLICK BELOW.

No positions in stocks mentioned.

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