Yesterday, the fed, in an effort to restore liquidity, “loaned†the banks three hundred billion dollars with mortgage backed securities as “securityâ€. Because these securities are not worth @#$% it in fact purchased these securities. And because the mortgages backing these securities are not worth @#$% it in fact purchased the mortgages. And because the mortgages are for more than the value of the properties, it in fact purchased the properties – mainly residential properties.
But government is notoriously incapable of managing residential properties. The properties will in the end be at best occupied by people who pay very little rent, at worst will be overrun by gangs and squatters, and turned into ruinous slums.
Further, this three hundred billion is off budget. On paper, the fed has merely exchanged one security for another. In reality, the fed has made a massive investment in real estate at inflated prices.