Federal Reserve

jbarto65 · Joined: 04 Nov 2007 Posts: 626 -0.11 Dollars($)

I just heard on the news tonight where the federal reserve pumped a bunch of money into the market, letting lenders use their slump mortgages as collateral.

what are your thoughts on this? How will it help people who already have a mortgage out?

larry · Joined: 27 Jun 2007 Posts: 3328 473.51 Dollars($)

Hi jbarto,

I think this is done to promote liquidity in the housing market and to stop this economic crisis. This is actually the first time when Federal Reserve is taking the non-agency residential mortgage bonds as auction collateral.

Fed is actually socking the mortgage debts to give a relief in this financial disaster and accepting 200 billions of dollars as of housing debt as collateral.

Best of luck,
Larry

Caron

Hi jbarto and Larry,

The Fed is actually trying to help banks and brokerages swap their mortgage-backed securities for treasury debt and thereby eliminate the credit crisis. There have been five rate cuts since the past few months but experts feel they haven't been much effective. Hopefully the swap program will prove to be a better initiative taken by the Fed.

Under the new initiative, Fed has promised to offer 200 billion dollars in a new Term Securities Lending Facility auction with a term of 28 days instead of the14 days under an existing program. The auctions are likely to begin from March 17.

What the Fed wants to do through this program is to make more funds available to banks hit by credit crunch so that they can increase their lending services.

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