EconoMonitor

The Wilder View

FYI: The Fed started buying MBS today

Today, the Fed announced that it (the NY Fed) began purchasing GSE mortgage-backed securities (MBS) today:

The Federal Reserve Bank of New York today began purchasing fixed-rate mortgage-backed securities guaranteed by Fannie Mae, Freddie Mac and Ginnie Mae. Selected private investment managers are acting as agents of the New York Fed in these purchases.

Summary data detailing these operations will be available on the New York Fed’s website beginning Thursday, January 8, 2009, and will be updated on a weekly basis each Thursday.

This program, first announced on November 25, 2008, is intended to support the mortgage and housing markets and foster improved conditions in financial markets more generally.

RW: You can find out more about this program here. Basically the Board of Governors has authorized the purchase of GSE-backed (Fannie Mae, Freddie Mac, and Ginnie Mae) MBS on the open market via the creation of reserve balances. This $500 billion transaction will occur periodically throughout the second quarter of 2009; it should help to drive mortgage rates down farther.


Originally published at the News N Economics blog and reproduced here with the author’s permission.

5 Responses to “FYI: The Fed started buying MBS today”

AnonymousJanuary 6th, 2009 at 7:56 am

From this point I think FNM & FRE will not go down anymore, as the goverment put a lot of money on this two companies.Alberto.

WintermuteJanuary 9th, 2009 at 4:00 am

Why do intelligent people sit back and accept government news-spin at face value?”…is intended to support the mortgage and housing markets and foster improved conditions in financial markets…”Incredible. The truth is being so massaged that it is unrecongisable. The spin is virtually propaganda.The ONLY reason the Fed is buying MBS is because it is FORCED to. Forced to because otherwise Fannie, Freddie and Ginnie will DEFAULT. They are unable to rollover debt because there is not enough buyers. An unprecedented disaster. Every news organisation in the country should be taking them to task over this systemic incompetence.The government would like a healthy housing market and financial markets, obviously, but to say this is the reason for spending billions of taxpayer dollars propping up insolvent institustions is false.

SteveJanuary 9th, 2009 at 11:23 am

The questions would be who are they favoring and are they paying a price that will enable them to reduce their position as well as expand it. Greed is alive and well in Wall Street. A well motivated bureaucrat will be aced by the fixed income bond traders every time. If the Fed hasn’t figured out a way to become a market participant both on buying and selling sides, it will be helping selected sellers (on behalf of the US residents or taxpayers) and not more.

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