Is there a way for you and I to borrow at the Fed rate?

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talltodd
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Is there a way for you and I to borrow at the Fed rate?

Post by talltodd »

Sure would be nice.
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momar
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Re: Is there a way for you and I to borrow at the Fed rate?

Post by momar »

Are you as credit worthy as the US government?
"Index funds have a place in your portfolio, but you'll never beat the index with them." - Words of wisdom from a Fidelity rep
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TheTimeLord
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Re: Is there a way for you and I to borrow at the Fed rate?

Post by TheTimeLord »

momar wrote:Are you as credit worthy as the US government?
Banks borrow from the Fed not the U.S. government.
IMHO, Investing should be about living the life you want, not avoiding the life you fear. | Run, You Clever Boy! [9085]
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talltodd
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Re: Is there a way for you and I to borrow at the Fed rate?

Post by talltodd »

More so, I'm debt free.
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Archie Sinclair
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Re: Is there a way for you and I to borrow at the Fed rate?

Post by Archie Sinclair »

StarbuxInvestor wrote:
momar wrote:Are you as credit worthy as the US government?
Banks borrow from the Fed not the U.S. government.
The Federal Funds Rate is the rate at which banks lend to one another. http://en.wikipedia.org/wiki/Federal_funds_rate
dumbmoney
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Re: Is there a way for you and I to borrow at the Fed rate?

Post by dumbmoney »

Not directly. But in effect, you can borrow at something close to the Fed Funds rate by using index futures. Obligatory MT thread link:

http://www.bogleheads.org/forum/viewtop ... =10&t=5934
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Grt2bOutdoors
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Re: Is there a way for you and I to borrow at the Fed rate?

Post by Grt2bOutdoors »

talltodd wrote:More so, I'm debt free.
So what? Any one who can read a balance sheet knows that is reflective of a "Point in Time", as opposed to a daily cash flow statement which shows your sources and uses of inflows and outflows. No, I would not lend to you for "free". There is a real cost and if you want money bad enough, you'll have to pay for it.
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Code Commit
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Re: Is there a way for you and I to borrow at the Fed rate?

Post by Code Commit »

Hmm, depends on how much and for how long do you want to borrow (and of course, your credit history). I still keep getting bombarded with 0% APR offers for 15-18 months for purchases and balance transfers.

Also, the Fed rate is the rate that institutions charge each other on overnight basis. If I buy something in my margin brokerage account today (without having funds in cash), I have 3 days to ACH transfer the funds to my brokerage account before getting charged interest rate. (Note: Of course, this is collateralized 0% loan for 3 days, whereas fed rates usually mean un-collateralized loans).

Assuming Fed rate is currently 0 to 0.25%, you could beat it, or at least match it. :wink:
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Phineas J. Whoopee
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Re: Is there a way for you and I to borrow at the Fed rate?

Post by Phineas J. Whoopee »

Hi talltodd,

I think your question is ambiguous. Are using "the Fed" as the short name for the Federal Reserve System, or do you mean the U.S. Treasury, which issues Treasuries of all stripes?

You and I, I'm assuming you asked what you meant, can borrow at the rate the Treasury gets if we can convince investors we're just as credit worthy. [cynicism]Another couple of flirtations with the debt ceiling might make that more likely than it is today.[/cynicism] :happy

If you mean the Fed, then do you mean the discount rate, or the federal funds rate? The latter, as noted upthread, is the average overnight rate at which banks lend excess reserves to each other. The Fed intervenes in the short-term market to influence that rate. Years ago the evening television news would report whether the Fed had added or drained reserves that day.

Yes, you and I could borrow at the discount rate, although if we did we wouldn't want it known. All we'd have to do is pool our resources, and recruit more investors, keeping in mind all must have good character and that there's a limit on the total number. Then, we convince our state or, as it's probable we live in different states, the federal government to grant us a banking charter, and we buy our Fed shares and deposit our initial reserves. Once that's done we can begin our bank's operations, and we'll have access to the Discount Window whenever we need it.

Hope that helps. :happy

PJW
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LH
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Re: Is there a way for you and I to borrow at the Fed rate?

Post by LH »

talltodd wrote:More so, I'm debt free.
Awesome.
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LH
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Re: Is there a way for you and I to borrow at the Fed rate?

Post by LH »

Grt2bOutdoors wrote:
talltodd wrote:More so, I'm debt free.
So what? Any one who can read a balance sheet knows that is reflective of a "Point in Time", as opposed to a daily cash flow statement which shows your sources and uses of inflows and outflows. No, I would not lend to you for "free". There is a real cost and if you want money bad enough, you'll have to pay for it.
Heh, yeah.

It's kinda like when one buys treasuries, you have to pay for it in real terms. Might as well buy some long term nominals right?

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grabiner
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Re: Is there a way for you and I to borrow at the Fed rate?

Post by grabiner »

If you have bonds, then you can sell these bonds, which is equivalent to borrowing at the bond's rate.

And the tax laws often allow ordinary investors to borrow at an unusually good rate. If you buy a house with a 30-year 4% mortgage and you are in a 35% combined federal and state tax bracket, you are effectively paying only 2.6% interest on the 30-year loan.
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