Tags: Fed | Members | Mortgage | Securities

Some Fed Members Want to Sell Mortgage Securities

By    |   Friday, 23 Apr 2010 02:16 PM

A growing number of Federal Reserve policymakers reportedly want the central bank to unload some of the $1.25 trillion in mortgage securities it amassed during the financial crisis.

The Fed’s purchases, which ended March 31, were designed to unfreeze the credit markets and lend support to the beleaguered housing sector.

But some Fed policymakers believe the support is no longer needed, and there is concern that the liquidity the central bank pushed into the financial system when it bought the securities could fuel inflation, Fed sources tell CNBC.

Some also are worried that all the Fed’s emergency lending has made its balance sheet too large.

At least six members of the Fed's policymaking Federal Open Market Committee support the idea of dumping mortgage-backed securities soon, the sources said.

The FOMC normally has 12 members, but thanks to two vacancies on the Fed’s Board of Governors, it has only 10 now. So the six in favor of selling may be able to force the issue.

Some members, such as Richmond Fed President Jeffrey Lacker, want to begin selling assets immediately.

Others, such as St. Louis Fed President Jim Bullard, want to wait, but favor asset sales as one of the Fed’s first actions to tighten monetary policy.

A bigger question is when the Fed will abandon its pledge to keep interest rates low for an “extended period.” Most experts don’t see that happening at the FOMC’s April 28 meeting.

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A growing number of Federal Reserve policymakers reportedly want the central bank to unload some of the $1.25 trillion in mortgage securities it amassed during the financial crisis. The Fed s purchases, which ended March 31, were designed to unfreeze the credit markets and...
Fed,Members,Mortgage,Securities
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2010-16-23
Friday, 23 Apr 2010 02:16 PM
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