The Fed's $2.7T mortgage problem
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The Fed's $2.7T mortgage problem
1–10 of 106 posts
Re: The Fed's $2.7T mortgage problem
#2Given that there's nothing forcing the Fed to unload these mortgages, the option of putting them on the market (thus driving commercial mortgage rates higher) seems like a policy lever that will be good to have, cooling real estate inflation selectively separate from the federal funds rate.
Re: The Fed's $2.7T mortgage problem
#3I read the article twice an I don't understand the challenge posed by leaving the mortgages on the balance sheet.
I don't think that the fed has wo worry about freeing up the capital to relocate because they printed it into existence in the first place. They also don't want to do more QE because the market is already overheated.
Re: The Fed's $2.7T mortgage problem
#4Problem? No, it's working as designed: as a plausibly deniable mechanism to print trillions for rich people. Meanwhile, inflation will be blamed on the billions printed for poor people.
"Balance sheet that never rolls off" is very much in the same genre as "loan that is actually a grant" and "financing tax cuts with debt."
Re: The Fed's $2.7T mortgage problem
#5The recession in 2008 was never really fixed, we just kicked the can down the road.
Re: The Fed's $2.7T mortgage problem
#6Given that there's nothing forcing the Fed to unload these mortgages, the option of putting them on the market (thus driving commercial mortgage rates higher) seems like a policy lever that will be good to have, cooling real estate inflation selectively separate from the federal funds rate.
Driving rates higher won't cool inflation except by raising prices - which is inflation.
They want to stifle the demand so as to match supply better, but when it's a supply shock and the United States is short something like 3 million houses, it seems a fairly punitive and misguided way to approach solving the problem.
Re: The Fed's $2.7T mortgage problem
#7The recession in 2008 was never really fixed, we just kicked the can down the road.
what does this mean exactly? We can't raise the rates anymore without substantial structural shift in our economy? Such as the end of ridiculous earnings-to-price multiples?
Re: The Fed's $2.7T mortgage problem
#8Kind of a silly article. When the Fed sells enough bonds, interest rates go up. It doesn't matter if they sell mortgage-backed securities or something else.
Selling these does not effect the housing market any differently from the Fed selling some other bond.
Re: The Fed's $2.7T mortgage problem
#9The Fed is compounding its mistakes of not stopping QE last year by pulling forward QT in order to fight inflation that is outside of its control (Ukraine and China).
Re: The Fed's $2.7T mortgage problem
#10I was talking about this with a friend today.
I think if the Fed announced they were selling agency MBS as part of their QT program we would see a paradigm shift in markets. Like limit down kind of days. I think that's what the punch bowl being taken away truly looks like.
And if the S&P down 35% doesn't get inflation down, then I think that's probably next on the list.