Is The U.S. Government Buying Stocks?

[girl gone mad]

Is The U.S. Government Buying Stocks?
http://www.washingtonsblog.com/2010/01/is-us-government-buying-stocks.html">Washington's Blog

As I pointed out in December 2008, Nouriel Roubini wrote the month before that the government might buy U.S. stocks:

"The Fed (or Treasury) could even go as far as directly intervening in the stock market via direct purchases of equities as a way to boost falling equity prices. Some of such policy actions seem extreme but they were in the playbook that Governor Bernanke described in his 2002 speech on how to avoid deflation."

Given that Roubini was previously a senior adviser to Tim Geithner, he probably knows what he's talking about.

Now, Charles Biderman, CEO of TrimTabs, argues that the government may, in fact, have been buying stocks to prop up the stock market. Given that 25% of the top 50 hedge funds in the world use TrimTabs' research for market timing, it is a credible source.

Specifically, Biderman writes:

"As far as we know, it is not illegal for the Federal Reserve or the U.S. Treasury to buy S&P 500 futures. Moreover, several officials have suggested the government should support stock prices.

For example, former Fed board member Robert Heller opined in the Wall Street Journal in 1989, “Instead of flooding the entire economy with liquidity, and thereby increasing the danger of inflation, the Fed could support the stock market directly by buying market averages in the futures market, thereby stabilizing the market as a whole.”

In a Financial Times article in 2002, an unidentified Fed official was quoted as acknowledging that policymakers had considered buying U.S. equities directly, not just futures. The official mentioned that the Fed could “theoretically buy anything to pump money into the system.”

In an article in the Daily Telegraph in 2006, former Clinton administration official George Stephanopoulos mentioned the existence of “an informal agreement among the major banks to come in and start to buy stock if there appears to be a problem.”

http://www.washingtonsblog.com/2010/01/is-us-government-buying-stocks.html">more...

[sharesunited]

1. If they would only vote those shares in the public interest, then we'd really be getting somewhere!

[dixiegrrrrl]

2. Well, duh...

We give $$$$ to the Gov't which gives it FREE to banks so the banks can use FREE money to speculate in the stock market....this is now ...news???? I thought everyone knew what the Fed was doing.

And in return, we, the taxpayer who gave the $$$ to the Gov't who gave it FREE to the banks..
we get.....uh......ermmm....gee, must be getting something in return...lemme think a minute...

[rucky]

3. This is how Orange County went bust.

Not exactly, but...

[lib2DaBone]

4. What happens when the rest of the financial world figures it out?

That the U.S. has been buying their own bonds. The other hot money will go to wherever there is a better interest rate.

How can the U.S. finance wars all over the globe if no one buys their bonds?