Bernanke Reassures the People During a Systemic Balk

The FOMC held an all-important meeting today and is set to have Bernanke and the gang keep the world on it's toes until 14:15 EST. What options does the Fed have left?

1. Operation Twist 2.0 (the first was under President John F. Kennedy) will do essentially nothing to "improve" the economy. Average maturity is already around 62 months... far enough above average. If the Fed swapped $300 billion out of shorter maturity and moved that into longer dated maturities, they could move the yield 2/10- 3/10 of a percent. This will not produce a significant result and much of the news of "Operation Twist."

2. Encourage lending by offering 0% on deposits at the Fed. The velocity will really pick up after this... wait, not it won't.

3. Operation Twist 2.1 swap into longer dated T's while shrinking their balance sheet.

4. Operation Twist 2.1 swap into longer dated T's while expanding their balance sheet.

5. QE3 around $1 trillion

6. Pull the plug - no stimulative action and keep a stable balance sheet.

7. Pull the plug and deleverage - no stimulative action and shirk the balance sheet.

8. Inject capital into Fannie and Freddie ($100-200 billion) with the intention of mitigating their losses and attempting to lower rates for buyers.

9. Raise the Fed Funds Rate and tighten monetary policy like they should have done in 2008. Let the collapse begin etc.

10. Have Dr. Bernanke amaze us with his bullish phraseology and indefinitely masked bearish data.

U.S. FEDERAL OPEN MARKET COMMITTEE SCHEDULE
 

Sep 20 - U.S. Federal Reserve's Federal Open Market
Committee (FOMC) holds meeting on interest rate policy, first of
two days (NOTE: Expanded from a one-day meeting). 

Sep 21 - Federal Reserve's Federal Open Market Committee

(FOMC) announces decision on interest rates and issues policy
statement at 1815 GMT (NOTE: Expanded from original one-day
meeting schedule). 

Nov 01 - U.S. Federal Reserve's Federal Open Market 
Committee (FOMC) holds two-day meeting on interest rates (to 
Nov. 2). 

Nov 02 - U.S. Federal Reserve's Federal Open Market 
Committee (FOMC) announces decision on interest rates, issues 
policy statement at 1815 GMT. 

Dec 13 - U.S. Federal Reserve's Federal Open Market  
Committee (FOMC) holds one-day meeting on interest rates;  
announces decision on interest rates and issues policy statement 
at 1815 GMT.