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Started By
Message
re: QE3
Posted on 9/13/12 at 12:53 pm to BennyAndTheInkJets
Posted on 9/13/12 at 12:53 pm to BennyAndTheInkJets
quote:
Buying Fannie, Freddie, and Ginnie mortgage backed securities in the open market, probably from mortgage originators (the banks that package the mortgages into a security).
So that in turn does what? Bail out the homeowners?
Excuse my ignorance on this, just trying to undertsand.
2
Posted on 9/13/12 at 12:57 pm to OnTheBrink
NO bail out - The fed is purchasing the mortgage from the banks (to hold as an investment), in turn providing the banks with additional funds to continue making loans.
Posted on 9/13/12 at 12:58 pm to OnTheBrink
quote:
So that in turn does what? Bail out the homeowners?
Raises MBS prices and lowers mortgage rates. The Fed's old transmission mechanism was buying mortgages, lowering the mortgage and financing rates, and in turn unemployment was lowered (there were several other steps but I'm simplifying).
That mechanism is broken, but still has some value.
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