Quote:
Originally Posted by a_Username
Loans straight from the Fed are not supposed to happen. This sounds very different from the government backed loans we heard about before; really, all loans are government backed in the sense of the FDIC.
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Actually, loans straight from the Fed can and do happen, they have to. During harsh economic times the Fed will step in as a lender of last resort, which is one of the Central Bank's very necessary roles assuming it comes to that. Apparently it indeed came to that.
So yes, the Federal Reserve effectively lent money directly to the lending arms of Ford, BMW, Toyota, etc so they could continue to loan money on cars. If they hadn't done this the recession would have gotten a whole lot worse because what was actually happening is the private banks were stopping the circulation of money.
Even better, all of those loans have been paid back and the Fed made a lot of money. Ultimately this was just the Central Bank doing the job of other banks when those other banks wouldn't. There are a lot of issues with how the Central Bank operates, but they got this one more or less right.