According to a story published in The Washington Post this morning, William C. Dudley, President of the Federal Reserve Bank of New York, said the Federal Reserve may opt to renew its commitment of purchasing additional mortgage-backed securities if the economy begins to weaken again. On March 31, the Federal Reserve will complete its obligation of purchasing $1.25 trillion in mortgage-backed securities.
There is no question this approach was extremely successful in maintaining current mortgage rates at or near historic lows, which was ultimately responsible for re-energizing the housing market. With the conclusion of the program drawing near, Dudley told both the Associated Press and the Nightly Business Report that the end of the first quarter is the appropriate point in which the Federal Reserve should fulfill its commitment due to the recovery of the economy as a whole. He also indicated the timing is right to end their purchases because by expanding the program now would only make it that much more difficult to discontinue its support later.
However, Dudley said the Federal Reserve would re-examine the program again should mortgage rates increase sharply. “Obviously, if mortgage rates were to back up a lot and if that had a big consequence for the economy, then we very well could rethink the issue about whether we wanted to buy more mortgages.” At the close of the Federal Reserve’s two-day policymaking meeting last week, they acknowledged the need to keep interest rates near zero for “an extended period” by stating in their press release that they “will continue to evaluate its purchases of securities in light of the evolving economic outlook and conditions in financial markets.”
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new york federal reserve
April 4, 2010 @ 9:31 pm
Timothy Geithner to testify on whether the New York Federal Reserve Bank improperly pressured Federal Reserve May Purchase Additional Mortgage-Backed …The Federal Reserve may opt to renew its commitment of purchasing additional mortgage-backed securities.