The Fed seems to have its priorities out of order.
The worthless mortgage backed securities the criminal Federal Reserve has taken off the hands of criminal bankers is putting the US tax payer at 1 billion dollars of risk per basis point.
A basis point is 1/100th of an annual percent of interest. So a 3% bond going up to 3.01% is 1 basis point.
The Fed has deemed it wise to hedge its risks on 25 billion of debt in one portfolio, but has, as far as we can tell, not hedged any of the trillions in worthless MBS debt its now holding.
Should rates continue to rise, this could blow the American monetary system to pieces in very short order.
Zero Hedge lays out the technical details of this discovery at the link below.
Zero Hedge reports
One has to ask why the SOMA is spending all this effort with Blackrock to hedge interest rate risks in a $25 billion MBS portfolio when it’s holding $1.25 trillion of MBS assets, plus a trillion of long dated Agency debentures and Treasuries. There is a billion dollars a basis point of interest rate risk in the SOMA.
Ron Paul, Alan Grayson, and every other activist in the Congress and the Senate should immediately ask the Fed why is Ben Bernanke hedging its ML1 IR exposure, while leaving its SOMA exposure completely unprotected even when the DV01 is about 100 times greater!!! A 1% move in rates would lead to a $100 billion loss for taxpayers. Should we have a failed auction, or go back to Paul Volcker times and have the 10 year hit over 10%… well, you do the math.