The Federal Reserve announced on Tuesday that it will initiate a program to purchase the direct obligations of housing-related government-sponsored enterprises (GSEs)–Fannie Mae, Freddie Mac, and the Federal Home Loan Banks–and mortgage-backed securities (MBS) backed by Fannie Mae, Freddie Mac, and Ginnie Mae. Spreads of rates on GSE debt and on GSE-guaranteed mortgages have widened appreciably of late. This action is being taken to reduce the cost and increase the availability of credit for the purchase of houses, which in turn should support housing markets and foster improved conditions in financial markets more generally.
Purchases of up to $100 billion in GSE direct obligations under the program will be conducted with the Federal Reserve’s primary dealers through a series of competitive auctions and will begin next week. Purchases of up to $500 billion in MBS will be conducted by asset managers selected via a competitive process with a goal of beginning these purchases before year-end. Purchases of both direct obligations and MBS are expected to take place over several quarters. Further information regarding the operational details of this program will be provided after consultation with market participants.
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i have rewatching the geithner testimony after the bear stearns rescue, he was alerted by the sec that they were in trouble, imagine that, this is a guy sitting in the middle of wall street who has to be alerted by the sec…couldn’t believe it. i think the senators at the confirmation hearings should replay that tape and get obama to find somebody else…
the purchase of mbs may be the start of some aggressive quantitative easing, we will see…
jck, I’ll have a post up on Geithner soon. Thus far I’ve only been leaving comments on other blogs.
With respect to your other posts this morning, I would only say, “The beatings will continue until morale improves!” Their strategies have not worked so far, why should this new round?
It would be better if they followed a simple inflationary policy to bring down the real value of accumulated debts, and force the other nations of the world to do the same. This includes China, which needs to let its currency appreciate, and use their reserves to buy goods and services from the rest of the world.