Gross and Futility of Fed

[ShoeshineBoy]

Bill Gross stated that the Fed's reserve policy just ain't what it used to be:

http://news.moneycentral.msn.com/provider/providerarticle.aspx?feed=OBR&Date=20071001&ID=7559283

He said that there there are instruments which bypass the Fed's control. (See below.) What is he talking about? What are "CDO's, CLOs, ABCP, CPDOs, SIVs", etc?? And are these a help or a threat?

""But financial innovation has done an end run around the banks," Gross said. "Derivatives and structures with three- and four-letter abbreviations -- CDOs, CLOs, ABCP, CPDOs, SIVs (the world awaits investment banking's next creation; perhaps IOU?) -- can now take a 'depositor's' dollar and multiply it 10 or 20 times.""

 

[daddyeaux]

he's just now figuring this out ???

 

[ShoeshineBoy]

Okay, this is making my head hurt. Sounds like these are just a bundle of loans that can be derivatized and collateralized. I don't see how this creates money and does an "end around the Fed".

http://www.securitization.net/pdf/cdo_en2.pdf

 

[ShoeshineBoy]

Quote from daddyeaux:

he's just now figuring this out ???

Banks can create money. How are these instruments, as Gross states, taking "a depositor's dollar and multiplying it 10 or 20 times"??

 

[daddyeaux]

http://en.wikipedia.org/wiki/Fractional-reserve_banking

 

[nazzdack]

Gross will go bonkers over the Securitized Housing Investment Trusts that are going to be launched soon.

 

[maxpi]

Quote from nazzdack:

Gross will go bonkers over the Securitized Housing Investment Trusts that are going to be launched soon.

It take Specialized High Intensity Training to understand those things...