Chapter 869 QE3 Arrives

As Lagarde said, before the subprime mortgage crisis, the Eurohypo real estate bank owned by Commerzbank was also one of the largest in Europe.

Therefore, affected by the subprime mortgage crisis, the real estate mortgage loans of this real estate bank, especially those involving subprime loans, brought huge losses to Commerzbank.

The subsequent acquisition of Dresdner Bank also increased the scale of Commerzbank's non-performing assets.

Before that, Commerzbank did not want to deal with these huge non-performing assets, but the problem is that under the current economic situation, the real estate in Europe has not seen signs of a complete recovery, so even if these non-performing assets involving real estate are sold, it is difficult to get a good bid.

However, it was different after William Weber Capital became the controlling shareholder of the European Union Bank formed by the merger of Commerzbank - to be precise, it was the Cavendish Trust Fund behind William Weber Capital.

Cavendish Asset Management, a subsidiary of Cavendish Trust, has successfully completed this model in the UK - purchasing the non-performing assets involving mortgage loans of banks (Standard Chartered Bank) at a suitable price, and then handing these properties over to Grainger Property Leasing Company to renovate these properties and rent them out, thereby earning stable rental income.

If the real estate industry can enter a stage of steady growth, then the corresponding rent will rise steadily, which can provide long-term and stable rental income for Cavendish Asset Management.

Even when the leasing business is on the right track, it can even be "securitized", that is, investors purchase the relevant debts of these properties, and then use the rent obtained as a stable income for their investment.

In this way, Cavendish Asset Management can recover the funds invested in these properties in this way - if they are in a general trend of rising house prices, they can also obtain additional property appreciation differences.

Because Barron knows that the current real estate industry in the UK will have an upward cycle of more than ten years after the subprime mortgage crisis, so this model is very safe and profitable.

Similarly, France and Germany, as two core countries in the European continent, are also in such a cycle of real estate recovery and rise. Therefore, this model that has been "running through" in the UK can also be used in France and Germany.

In fact, Cavendish Asset Management has already purchased a considerable amount of "non-performing assets" from Natixis Bank, and expanded the business of Granger Property Leasing Company from the UK to France.

Next, they can continue this process and purchase the "non-performing assets" related to real estate mortgages held by the original German Commercial Bank and its real estate bank Eurohypo, so as to help Euro Union Bank digest these "burdens" that are difficult to realize in the short term and revitalize their assets.

Perhaps someone will ask, then banks like Euro Union Bank that have "non-performing assets" related to real estate mortgages, can't they renovate these properties and rent them out?

Of course, this can also be done, but if the bank does this, it will involve real estate leasing business outside of their main financial business, and it will inevitably require extra energy and funds to operate.

These are certainly not as good as professional companies like Granger Property Leasing Company that have successful experience and have summarized and perfected processes.

And in terms of securitizing these real estate leasing businesses, companies like Cavendish Asset Management, which have successful cases and long-term operating performance, are more trustworthy to investors than banks that are eager to deal with non-performing assets generated by blind mortgage loans.

Therefore, it is not that other banks have tried to cooperate with other companies to do this, but the final effect is far from that of Cavendish Asset Management.

It is also because of Barron's confidence in Cavendish Asset Management's operating procedures that other companies can give the non-performing assets of Eurobank, which is difficult for other companies to give to satisfy the management of Eurobank.

It can be said that in this regard, from the initial Standard Chartered Bank to the current Eurobank, Cavendish Asset Management is really to help them solve non-performing assets, and its profits are more for the recovery of the entire real estate market, not the "price difference" between these assets and the market price after excessive price reduction.

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Next, it was not beyond Barron and Daisy's expectations.

On September 13, in order to stimulate economic recovery and employment growth, the Federal Reserve announced the launch of the third round of quantitative easing policy (QE3)!

They decided to buy $40 billion of mortgage-backed securities (MBS) per month, but did not specify the total purchase size and implementation period.

At the same time, the Fed will continue to implement the "reversal operation" of selling short-term Treasury bonds and buying long-term Treasury bonds, and continue to reinvest the principal of maturing agency bonds and agency mortgage-backed securities.

In other words, the Fed did not set a deadline for this asset purchase plan, which can be called "unlimited" monetary easing.

In addition, the Fed decided to continue to keep the federal funds rate in the ultra-low range of zero to 0.25%, and plans to maintain this level at least until mid-2015.

The Fed said in a statement that the U.S. economy continued to grow moderately after the subprime mortgage crisis, but employment growth was slow and unemployment remained high. Although prices of some key commodities have risen, overall inflationary pressure is moderate and long-term inflation expectations are stable.

The Fed said it will pay close attention to economic and financial data in the coming months. If the outlook for the job market does not improve significantly, the Fed will consider taking more asset purchases and making reasonable use of other policy tools.

Barron knew that the Fed's third quantitative easing policy did not end here. As the Fed said in the statement, it would decide whether to take further measures based on economic and financial data in the coming months.

In Barron's previous life, at the end of December, the Fed decided to further expand QE3. After the "twist operation" expired at the end of the year, in addition to continuing to purchase $40 billion in MBS each month, it will also purchase an additional $45 billion in long-term Treasury bonds to replace the "twist operation", with a monthly purchase quota of $85 billion, and this purchase plan also has no deadline!

In addition, the Fed also decided to continue to keep the federal funds rate at 0-0.25% when the unemployment rate is above 6.5% and the expected inflation level in the next one to two years is no higher than 2.5%. This is the first time that the Fed has linked the interest rate setting to the unemployment rate.