When the Fed lends money to banks what collateral they place?

[Hydroblunt]

Quote from The Kin2:

nothing.

Not exactly.

They buy US Treasuries with printed money and hence put an asset on their books. They only pay for the cost of printing.
A debt instrument, especially one that is backed by collateral, is an asset. Any government bond is backed by the power of taxation.

So the Fed can always boost up reserves by going out in the open market and buying US treasuries for pennies on the dollar. Then through the magical power of fractional reserve banking, member banks loans multiply off those reserves.

 

[Instant Karma]

Quote from crgarcia:

T-Bonds?, Mortgage backed bonds?, Defaulted loans?

here's your answer:



NEW YORK, Nov 2 (Reuters) - The U.S. Federal Reserve said on Friday it added $6.25 billion of temporary reserves to the banking system through a 3-day repurchase agreement.


The Fed said collateral accepted in the operation was $4.569 billion in agency debt, $481 million in mortgage-backed securities and $1.2 billion in Treasuries.


..and Gold is going thru the roof..