Will the Fed let mortgage rates rise?

November 24th, 2009, 1:00 am · 17 Comments · posted by Mathew Padilla

I’m seeing more news reports quoting people who think the Federal Reserve should, once again, extend its purchases of securities backed by mortgages issued by Fannie Mae and Freddie Mac. The Fed is supposed to stop by March 31.

The latest comes from the Wall Street Journal quoting Federal Reserve Bank of St. Louis President James Bullard:

“I have advocated to keep the asset purchase program open but at a very low level, and wait and see what happens, and as information comes in about the economy we can adjust that program while the federal funds rate remains at zero,” Bullard told Dow Jones Newswires in an interview Sunday ahead of a conference in New York. He added “no decision has been made” about the program’s fate.

Bullard becomes a voting member of the Federal Open Market Committee, which decides interest rates, in 2010.

The Fed has purchased more than $800 billion in mortgage securities and will buy up to $1.25 trillion.

So what do you think?

Will the Fed stop buying mortgage securities in March?

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Jc says:

November 24, 2009 at 8:09 am

The Fed have no longer “room” to extend it, neither to live it as it is.

Otherwise would make the same mistake that Greenspan did. Living it for too long will create another bubble.

Post Reply

ghostfaceinvestah says:

November 24, 2009 at 9:50 am

The Fed wants to create another bubble, that is the only hope for the US economy.

They will be buying MBS well into 2011.

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- Oil Can says:
  
  November 24, 2009 at 11:37 am
  
  The scary issue for me is that with all this printing and borrowing it could trigger inflation. Right now it’s no where near, but you can’t keep printing money. Or creating money, electronically
  
  Post Reply
- Sick_Of_Bears says:
  
  November 24, 2009 at 4:40 pm
  
  2011?!?……..try 2111……….
  
  I predict the Fed balance sheet will be at least $10 Trillion by the end of 2011……mark my words.
  
  And don’t say, “There’s no way they would do that, it would destroy the currency….blah, blah, blah”.
  
  What do you thing they are doing right now…….hello……..
  
  Do you think the Fed cares about the currency?……….really……….you really think so………
  
  Post Reply
  - ghostfaceinvestah says:
    
    November 24, 2009 at 7:37 pm
    
    2111? Could be. I saw 2011 is the earliest they would stop, but you may be right, it might be forever.
    
    As for destroying the currency, that is not something the Fed wants to avoid, that is Bernanke’s goal.
    
    Just google his speech, “Deflation, Making Sure It Doesn’t Happen Here”, he spells out exactly what he is doing today - printing money like crazy to intentionally destroy the currency.

nanowest says:

November 24, 2009 at 8:42 am

I think the fed should send me a check for 1 billion dollars.

Scott says:

November 24, 2009 at 8:49 am

I’ll take sheets of $100’s and wrap xmas gifts with them. Might be cheeper than wraping paper soon.

se says:

November 24, 2009 at 8:50 am

I’m not greedy. I’d settle for a check for $250,000.

ocobserver says:

November 24, 2009 at 9:00 am

Pay attention.

Today it was reported that GDP growth for the 3rd quarter was revised down from 3.5% to 2.8%. A full 20% downward revision. hmmm. Now how could they screw up that figure so badly??? The answer is obvious. They are misrepresenting economic growth to artificially elevate the markets in an attempt to infuse confidence (artificially) into the economy. hah. And we also learned today that the FDIC reserves are IN THE HOLE $8.2 BILLION DOLLARS. In other words, the FDIC is bankrupt! hah. And there is NOTHING in the rules that requires the treasury or the fed to backstop the FDIC. Will they?? Oh sure. Otherwise the pitchforks and torches will appear. But it mean another gobblement bailout. And how many more bailouts is the gobblement capable of until they implode our financial system.

Increase interest rates and watch the RE markets erode further. Obama is trying to desperately avoid that. But let’s face the fact. A full 20% of home loans that originated through the FHA is in delinquency or in foreclosure. About 50% of homes purchased in 2006 have mortgages with balances of greater than the value of the properties. WHEN, not if, interest rates go up what do you think that will do to home prices and to the overall economy??? hmmm???

I’m looking for good news but there’s none out there. One financial agency after another is going under and will need more bailouts. So how long can the gobblement prop them up without collapsing??? Even in a massive economy like ours, there is only so much money to go around. Keep printing monopoly money with wild abandon and something has to break. There’s no other way.

LovetheWeather says:

November 25, 2009 at 1:25 pm

The FDIC is not bankrupt - they are in the red because of the reserves. They are also getting the next 3-years of insurance payments from the banks up front (about $45B) so this is really a non-issue.

As for rates - sure they will go up, but we are not going to see 1980s mortage rates and 5-6% is the norm and they will always be 5-10yr variable rate loans to ease the pain.

Keep in mind that if the mortage rates did go up to 8-10% range that tank the whole economy - banks and Wall St are greedy, but they are not stupid.

Post Reply

marketbuy says:

November 24, 2009 at 2:34 pm

The Fed is the “Lender of last Resort”. Once you let the cockroaches out, they will multiply!! In other words, damn if you do, damn if you don’t. Now, pick your poison!

Also, in my opinion, the best time to buy houses is when interest rates rise over 6%! If so, homesellers will have no choice but to lower their prices to meet market price equilibrium.

The best time to “NOT” buy houses is when the government gives out handouts (stimulus)…..

Louie Sez says:

November 24, 2009 at 3:59 pm

…not much left to attempt, other than reinstitue the draft, and start another war, this will help unemployment, and get manufacturing going again :]

bob says:

November 24, 2009 at 9:04 pm

great news would be obama resigning. Lets make it happen. The sooner the better. Why don’t we out with pelosi and reid. Out with the fools!!

taxes and modifications says:

November 25, 2009 at 4:57 am

NANOWEST– don’t be greedy, and don’t look for water in the desert, I think Bank of America should send every taxpayer 20K of that bailout bonanza and then the economy would be booming in no time at all.

Liar Loan says:

November 30, 2009 at 12:29 pm

Well, they’re paying 9% interest to the taxpayers. Is that what you mean?

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Greg in OC says:

November 25, 2009 at 8:00 am

While deflation’s a threat and the economy is still in the tank, don’t surprised that they continue to print.

When inflation starts to loom, they’ll have no choice but to raise rates.

timcitizen says:

November 28, 2009 at 10:30 am

inflation is already here. $3 gas and 500k ghetto living.

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