So, a measured and logical sequence of steps to deal with circumstances that were unusual and exigent.

Everything is well contained.

How droll.

"Further relief was provided by the TSLF, which in effect implemented a swap of in-demand Treasury securities from the Federal Reserve's balance sheet for less liquid mortgage-backed assets."

Oh, wait, I see. Mortgage-Backed Securities are "less liquid".

"But given a little time for perspective I believe we will find a certain beauty to it all."

Lest I be perceived as being too cynical on the point, I have to agree with a previous post that finds broad agreement with the actions taken. Indeed, the Fed has been nimble in managing a chaotic and complex unwinding in the debt markets. However, as Roubini and others have argued, the underlying solvency issues remain to be addressed.

There is a certain ugliness regarding these matters, many of which are yet to be fully realized.

or... thwack ye mole:

http://pbfcomics.com/?cid=PBF216-Thwack_Ye_Mole.jpg

I see an attempt to LOOK like they are being creative and precise in the implementation of their moral hazard.

But moral hazard is moral hazard, whether is gets delivered via shotgun or rifle....you're still killing the bastard.

All this talk about perception, and expectations is masturbatory at this point.

By the seventh or eighth inning, a sucker starts to recognize a con. By the ninth inning he's street smart.

A measured and logical sequence of steps to address very specific liquidity distress in financial markets

I would think it to be more measured and logical for the Fed to have not sewn the seeds of this crisis in the first place.

btw RobDawg is it possible to short the fed?

Kao commented on a number of
important credit spread properties. The
volatility of credit spreads increases as
credit quality declines. Credit spreads
show mean reversion. Credit spread
changes are positively correlated with
changes in the slope of the Treasury
curve, with interest rate volatility, and
with swap spreads. They are negatively
correlated with changes in LIBOR, the
level of Treasury interest rates and
equity returns.
Credit spreads show higher volatility
for short-term than for long-term bonds.
The term premium itself is negatively
correlated with the slope of the Treasury
curve for both investment grade and
high yield bonds.

Matching the duration of the debt to
the duration of the mortgage pool
reduces risk in the debt financing of the
pool. It turns out that the multi-stage
model does a better job of matching
duration than does the single-stage
model. And where callable bonds are
used we can expect negative convexity,
just as we can for mortgages that can be
prepaid. Again, the multi-stage model
showed its superiority in matching
convexity over the single-stage model. It
also turned out that a strategy of simply
minimizing downside risk through
minimizing the duration and convexity
gaps (delta and gamma hedging) was
less effective than the multi-stage
stochastic programming in terms of
providing a superior efficient frontier.
http://introduction.behaviouralfinance.net/vol5_text.pdf

Negative convexity which is the charateristic of the attenuation of maturity due to interest rate decline, you are also correct that as rates go up mortgages don't necessarily go up in value so much as outperform bonds that don't have pre-payment risk and there are other factors involved, like years to maturity etc.

Buy bonds!!

Rising inflation eats into the value of fixed income investments and signs of rising prices normally push bond prices lower. But the bond market was unaffected by Wednesday's report, partly because it is a lagging indicator, according to Bill Larkin, a portfolio manager at Cabot Money Management in Boston.

"The assumption is that inflation is not going to be a concern going forward," Larkin said. And a government report showing signs of improvement in the labor market, "more than offset the inflation fear."

The Labor Department reported that the number of Americans filing for state jobless benefits decreased by a seasonally adjusted 10,000 to 450,000 in the week ended August 9.

ROTFLMAO!!!!

Well even Happy Days had a turning point,

When will Ben suit up and jump the shark?

So, the spoiled brat kids (i.e., banks) left home and promptly overextended themselves, and now the parents (i.e., Fed governors) are covering for them by lending them their credit cards, all so everyone else won't know their kids are losers and they therefore are lousy parents.

It's only a matter of time before the kids take the parents down with them. That is, until the grandparents (i.e., US Treasury) step in with the world's biggest credit card.

The 30-year long bond rose 25/32 to 99 20/32. Its yield fell to 4.52 percent from 4.57 percent.
The 2-year note rose 1/32, and yielded 2.46 percent, down from 2.48 percent late Wednesday.
Trading was light, which tends to make movements more erratic.
"We're still range-bound in my opinion," Spinello said, referring to the range that Treasurys have bounced between over the past few months. He said that while bonds will remain beholden to oil prices and stocks, the ongoing problems in the credit and housing markets should continue to support them.

Meanwhile; Investors to money-market funds contributed $22.43 billion in the week ended Tuesday, bringing total net assets to $3.517 trillion, according to the Money Fund Report, published by iMoneyNet Inc.

Institutional investors contributed $22.02 billion, while individual, or "retail," investors contributed $413.9 million.

Assets in taxable money funds rose by $16.74 billion to $2.990 trillion.

meanwhile: The truth is even uglier than I suspected.

Auction-rate securities were sold by nearly all the big firms as a slightly higher-yielding, but safe, alternative to money-market funds. They proved anything but when the auction markets froze in February, stranding thousands of investors with more than $300 billion in illiquid holdings.
Auction-Rate Securities And the Ugly Truth - WSJ.com

Buy bonds and run the price up!!!

WAWAWAWA,

So in english does your name translate to LALALALA?

I know what you whacked last summer.

The only thing the FED has done is take a bad situation that THEY caused and made it worse.

Now that so many people knew everything so much better than the FED, government and company management, why have you guys not prevented it? You should have made sure decades ago that you were in positions of responsibility, so it would have never happened. That's why you were all long $CRB until July 11th and then short, right?!

O-Joe

Hmmm...

Well isn't all of this special.

"I know that in some quarters—maybe the one where you reside—all this activity had a certain frenetic, whack-a-mole feel to it."

I reside in a solar system with a sun named Sol, in a galaxy called the Milky Way. What galaxy do you reside in? I hope it's the Star Wars one, cuz that's far, far away.

Cheers,