Fed Seeks to Limit Slump by Taking Mortgage Debt (Update2)
Add a Comment 
fed, Mortgage Meltdown March 12th, 2008March 12 (Bloomberg) — Federal Reserve Chairman Ben S. Bernanke’s latest attempt to alleviate seized-up credit markets marks his most direct effort yet to repair the mortgage meltdown that poses the biggest threat to the economy.
The Fed pledged yesterday to lend, in return for mortgage debt, $200 billion of Treasuries to the securities firms that trade directly with the central bank. Officials told reporters later that the program may escalate from there as the central bank seeks to break the logjam in the home-loan market.
The step goes beyond past initiatives because the Fed can now inject liquidity without flooding the banking system with cash. Bernanke and his colleagues are trying to halt a cycle in which the losses on mortgage investments cause banks to cut their lending, sending the economy into a deeper contraction.
“It is a strong attempt to stabilize a crisis,” Henry Kaufman, president of Henry Kaufman & Co. in New York and the former chief economist at Salomon Brothers Inc., said in a Bloomberg Radio interview. “It is a further recognition that this credit crisis is deeper and wider, and has been exceedingly opaque, in contrast to earlier credit crises.”
Read Full Article
Tags: fed, Mortgage Meltdown
