The Federal Reserve

Federal Reserve IS the mortgage market

The Federal Reserve announced this week that it is going to wind down its program to purchase $1.5 Trillion worth of mortgage backed securities.

“I don’t think there are enough private buyers to replace the central bank,” said Sung Won Sohn, professor of economics at California State University. “If there is even an inkling that the Fed is going to start selling by 2010, we would see mortgage rates go up right away.”

People are right to be concerned about the Fed trying to sell any of that massive pile of overpriced securities. But that isn't the only reason to doubt the Fed's ability to wind down this program.

Money Market Fund Guarantee Expires

The Federal Reserve has started pulling back from backing the entire financial establishment.

Treasury Announces Expiration of Guarantee Program for Money Market Funds
Program Winds Down as anticipated, Generates $1.2 billion in participation fees for U.S. Taxpayers
The U.S. Department of the Treasury today announced that the Guarantee Program for Money Market Funds (the "Program") will expire today. The Program was initially established for a three-month period that could be extended up through September 18, 2009. Since inception, Treasury has had no losses under the Program and earned approximately $1.2 billion in participation fees.

Helicopter Ben Keeps His Job and Bloomberg Scores!

So much for the jockeying to get the big Fed job appears to be over.

From the New York Times, Obama to Nominate Bernanke to 2nd Term as Fed Chief:

President Obama plans to nominate Ben S. Bernanke to a second term as chairman of the Federal Reserve, administration officials said Monday night.

The nomination, while expected, comes after Mr. Bernanke has had perhaps the most tumultuous term of any Fed chairman, helping to steer the economy through its greatest downturn since the 1930's. Mr. Bernanke is a Republican who was appointed by President George W. Bush.

A top White House official said Mr. Obama had decided to keep Mr. Bernanke at the helm of the Fed because he had been bold and brilliant in his attempts to combat the financial crisis and the current deep economic recession.