Fed Credit Lines Continued

Here’s another angle in the Fed refusing to disclose what assets they are financing. If we knew who they were buying from, and what they were buying, the markets would ask the question, “How much more firepower are they willing to expend?” If the judgment is “little”, market players would sell what the Treasury/Fed was buying, and if the judgment is “a lot”, market players would buy what the Treasury/Fed was buying.

That leads me to believe that the Treasury/Fed doesn’t want to commit a lot more resources to this fight. If they felt they had a lot more firepower, they would happily disclose their actions, because the private markets would aid their actions.

(c) David Merkel, Ten Notes For the Current Crises