On March 22, 1987, the barge 'Mobro' left Islip, Long Island, on what was to be a short trip hauling waste to a southern landfill. The voyage, however, did not go as planned...
The "Garbage Barge", as it came to be known, and its 3,186 tons of baled trash, would ultimately travel more than 6,000 miles, being turned away by North Carolina, Florida, Louisiana, Alabama, Texas, and New Jersey, as well as Cuba, Belize, and, at one point, the Mexican Navy. Nobody wanted the barge's cargo.
On Monday, December 17, 2007, the Federal Reserve embarked on a journey of its own, opening a new "Term Auction Facility", providing $20 Billion of Fed Funds for a 28-day term, and accepting a "wide variety" of collateral. This was one of many innovations the Fed has instituted over recent months to address tightening credit and liquidity.
The Fed's balance sheet has grown, and changed in composition, significantly since that time, as we noted Monday. The level of non-traditional loans and assets held on the Fed's balance sheet, at $906 Billion, is greater than the entire sum of the Fed's assets ($893 Billion) only ten months ago.
Over the past week alone, this amount has grown by +$283 Billion, now accounting for 60% of the Federal Reserve's total holdings.
Under the bailout plan, the Treasury is planning to launch its own $700 Billion scow, taking on unwanted refuse from financial institutions and holding them until such time as they can be sold at or above their purchase price.
When, or perhaps whether, a market for those assets will materialize is an open question...
As for the original Garbage Barge ?
In the end, after failing to find anyone to accept its unwanted cargo, it finally returned right back to its starting poing at Islip, where its trash was burned.
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Excellent Analogy Peter. By that token, Government can and should sell these bags of oranges back to the financial companies once confidence returns (return the garbage to point of origin). The financial institutions will have to comply if they have to count on backing by Fed next time.
ReplyDeleteAlso don't underestimate the power of financial scavengers to clean up garbage. There will be buyers for these MBSes. Warren Buffet is already sensing opportunity.
Himanshu
I think that we have to implement some policies like japan has. they recycle almost everything and it is better for the community and nature.
ReplyDeleteIt is a good advice about doing this.
ReplyDeletewhat the f...? is totally incredible the amount of garbage that a city can produce, I mean in a entire country could produce this amount of garbage in a year, and only one city do this.
ReplyDelete