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January 05, 2010

Federal Reserve: Give us your tired, your poor, your $1.2T in dubious mortgage backed securities

I'm guessing that the Federal Reserve Bank isn't paying much for these even though the tab is $1.2T.

...In addition, the Federal Reserve is buying up $1.25 trillion in mortgage-backed securities to help keep interest rates at or near record lows. That program is scheduled to run out at the end of March, though a sudden jump in rates could force the Fed to extend it...

I wonder who's books they coming off of? I wonder how much this might impair the Federal Reserve's ability to make adjustments in the future? Being light $1.2T cash and heavy $1.2T in illiquid stuff that could take several years to sort through and dispose of is going to cramp anyone's style.

This sounds like a major bet by the Federal Reserve member banks that the real estate market has bottomed and MBS values are at an absolute low point.

Oh, and you'll have to scroll down to around paragraph 15 in that article to find this little nugget. Not like AP is trying to hide anything though. They'd never ever do that.

I bet the Federal Reserve is buying some of the GMAC MBS's as the taxpayers get fleeced for a huge loss and writeoff.

GMAC Financial Services, the consumer lender now majority owned by the government, said Tuesday it expects to report a loss of about $5 billion in the fourth quarter thanks to deep writedowns on underperforming mortgage loans it plans to sell.
I'm sure its pure coincidence that the taxpayers, who own most of GMAC these days, take it in the shorts while the international bankers comprising the Federal Reserve scoop up the goods at what may prove to be bargain prices.


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posted by Purp at 09:12 PM

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