What Will FED Do Next to Revive U.S. Economy?
WITH BENCHMARK FED FUNDS RATE NEAR ZERO, WHAT NEW ACTION CAN FED TAKE TO REVIVE THE ECONOMY?
Mortgage Interest Rates are among the lowest they have been in decades. Yet, still, the U.S. Economy is faltering, Federal Debt is growing, and the U.S.Credit Market is frozen - still!
What new action will the Federal Reserve Board take to stabilize the economy?
According to an article today in the Wall Street Journal article from Reporter Jon Hilsenrath, They have already increased their purchase of troubled bank assets, with less-than-desired effect. One option involves the purchase of long-term treasury securities. Another involves increasing its purchase of debt which is issued or guaranteed by Mortgage Giants Fannie Mae and Freddie Mac.
The desired impact? Driving down interest rates even further by pushing higher the price of T-Bonds, thereby reducing their yields. Economists contend that could bring down other long-term interest rates, as many of these rates are tied to the amount of U.S. Treasury debt.
The Fed has been hesitant to implement such a program. However, a similar program undertaken by the Bank of England has met with some success, and Federal Reserve Board Chairman Ben Bernanke is encouraged by these numbers.
In addition, the Federal Reserve Board is in the process of ramping up its Term Asset-based Securities Loan Facility, which would add backing to much consumer debt.
Will this work to improve the credit markets, and as an extension, the U.S. Housing Market, by freeing up more funds for home loans?
That's the million dollar question!
DEAN MOSS & DEAN'S TEAM CHICAGO
