mortgage-backed securities

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.