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The New York Fed’s urgent bucket brigade

Photo by “wall street sign” by nakashi via Flickr (CC BY-SA 2.0).

As our national media outlets bathe in an echo chamber, the economic forces that decide the fate of our citizens’ livelihoods are teetering. Back in October, Chairman Jerome Powell of the Federal Reserve Bank of New York admitted to their role in an ongoing Wall Street bailout that mimics the exact patterns that led to the Recession of 2008. According to “Wall Street on Parade,” over the past 63 days the Federal Reserve’s balance sheet has expanded to include an extra 253 billion dollars weekly. All of this new, freshly-printed cash is funneling straight into a Fed-diagnosed “liquidity problem.”

Since the Federal Reserve’s inception in 1913, the powers held by the firm include three economic abilities, as described by Wall Street reporter Russ Martens. “The ability to create money electronically at the push of a button, the accepted right to meddle in the markets and the supervision of some of the largest bank holding companies in America.”

The need for the Fed’s intervention comes on the heels of Wall Street’s inability to pay back their mega-loans to “overnight repurchase agreements,” or repos. For some context, Martens defines these repos as “a short-term form of borrowing where corporations, banks, brokerage firms and hedge funds secure loans by providing safe forms of collateral such as Treasury notes.”

The need for the Fed’s intervention comes on the heels of Wall Street’s inability to pay back their mega-loans to ‘overnight repurchase agreements,’ or repos.

When the Federal Reserve simply prints billions of dollars per week to “soothe the global market,” we can picture the center of the banks’ spinning top growing wider and wider, further displacing its balance and momentum, until it becomes too weighted to continue spinning. This downfall is what economists are projecting as a mirror image of the 2008 crisis, in which the Federal Reserve was forced to bailout bank after bank, and almost every aspect of middle American life was darkened. During the Recession, blue collar American families saw unemployment rates hit 10% in 2009, felt a spike in divorce and reported incidents of domestic violence and hundreds of thousands lost their homes.

Upon taking an even further step back, the diligent reader will eventually come to the relationships that the New York Fed engages in with mega-firms like JP Morgan Chase—but that is truly a story for another article. All of these forces – the economic complications, deflated stocks and panicked citizens – are wrapped together like an unstoppable ivy.

When doing the research for this piece, I spent some time outside of Main Hall and asked students about their family’s experience during the recession of ‘08. Out of the 17 people I interviewed, seven of these students detailed the various setbacks that their parents faced during the time, mainly layoffs and having to mortgage homes. Of these seven responders, five of the students were living in the greater Philadelphia area during those difficult years. Perhaps not all of us were old enough to remember this bout of tumult, and I’m sure many of us were lucky enough to be spared the effects of the economic crash, but its effects are still felt in many communities across the country.

As the spinning top sits at the edge of its risk capacity, us young people are presented with an opportunity to prepare for this potential storm. Many of our families were directly affected by the recession, and we can learn from their experiences. Whether we’re freshmen or seniors, we are about to be thrust into this absurd world of work and money, and we will be independent humans.

For daily updates on Wall Street, visit WallStreetOnParade.com.

CJ Fudala is a fourth-year student majoring in English writing and minoring in journalism. CF895983@wcupa.edu

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