"THE Reserve Bank of Australia has exposed itself to more than $1 billion worth of household mortgages in the past few days as it seeks to spark life into moribund debt markets and help banks continue lending.
Amid reports of a similar intervention by the Bank of England, the Reserve Bank yesterday accepted $780 million worth of securitised Australian home loans as collateral for the regular loans it extends to local banks.....
The Reserve will only accept residential mortgage-backed securities backed by AAA-grade mortgage documents."
quote from smh.com.au - April 22, 2008.
Have I read that somewhere before!
My point is, if the RBA is accepting RMBS's (residential mortgage-backed securites) as collatoral for loans to banks - why dont they just lend straight to the people and cut out the middle man. Think of the savings to debt-ridden households.