Above is a photograph of a  mall in Oklahoma equipped with its own oil well that the Federal reserve spent 29 million dollars for when they lent money to JP Morgan Chase to take over Bear Stearns when it collapsed. Reuters UK broke the story this week.

The Federal Reserve is currently in the process of purchasing 1.25 Trillion dollars worth of Mortgage Backed Securities (MBS) in a desperate attempt to revive the housing market and get banks lending again. They had originally planned to purchase 500 million worth but when they finally saw the magnitude of the problem they decided to waste an additional 750 million more. The Federal Reserve’s  balance sheet has now swelled to nearly 2 trillion dollars.

This mall is half empty and is currently in foreclosure which begs the question, if the Fed is buying 1.25 Trillion dollars worth of home mortgages what is the real value of the assets they are buying? House prices have fallen 20 -30% and are expected to continue to fall well into 2010. It is estimated that all homes in the U.S. may lose 50% of their value. Which means that it is conceivable that the Federal reserve could lose nearly 750 billion dollars on these MBS purchases. It is important to note that these are your tax dollars at work. Once lost this money will never be recovered. And you know it is far worse than they are saying because the federal Reserve and other politician’s don’t want you to see what is on the Fed’s balance sheet. They say it is for your own protection and to protect the banks they lend to but that is nonsense. The truth is they are buying tons of garbage and the Fed’s balance sheet now looks something like Bear Stearns’ did before it blew up. If you want to stop being lied to sign the petition to audit the fed so the American people can see exactly what their tax dollars are buying. Unless of course you like being kept in the dark.

Please read my follow up to this post here.