Skip to comments.Why Did The Fed Do QE3 When Housing Market is Recovering?
Posted on 09/18/2012 10:32:30 AM PDT by whitedog57
Why did The Fed announce QE3 using $40 billion per month in agency mortgage-backed securities (MBS)? The housing market is improving on its own WITHOUT flooding the market with more liquidity.
Clearly, The Fed is focused on employment and the construction industry is one the industries that has suffered since the housing bubble.
Will lowering mortgage rates stimulate housing production? According to the Mortgage Bankers 30 year effective rate, we ALREADY near historic lows and it hasnt worked so far. And The Fed wants to push it even lower?
As of today, the spread between Fannie Mae 30 year current coupon (MBS passthrough rate) and 10 year CMT Treasuries yields has plunged to the lowest level since 2000.
Is the housing market recovering without massive Fed intervention? The signs look pretty good.
Builder confidence in the market for newly built, single-family homes rose for a fifth consecutive month in September to a level of 40 on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI), released today. This latest three-point gain brings the index to its highest reading since June of 2006.
Bear in mind that the index is still below 50, the direction is a positive one.
Meanwhile, FNC residential housing prices rose +0.8% in July.
While housing recovering, it is fragile. But the likely reason for The Feds massive intervention in the agency MBS market is the 14 Administration mortgage modification programs. But like housing purchases, there is already a refi wave underway WITHOUT Fed intervention.
I remain scratching my head as to why The Fed MASSIVELY intervened when both housing and mortgage refinancings are improving.
On the other hand, mortgage lending actually declined in 2011. It is hard for The Fed to stimulate housing purchases when mortgage lending has been declining.
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Propping up Obama? or causing an all out depression?
Both. It’s a win win for them. Obama wins, and it blows up? oh well. He’s not up for election again and has “flexibility” If he loses it blows up in Romney’s face and they can blame republicans.
Win-Win for the Dems.
Problem is. They are not even doing that. They are buying domestic debt with the printed money.
Because 0bama hasn’t committed enough irreversible damage to our economy? Because the NWO ordered Bernanke to stick one last knife into the heart of Uncle Sam?
The Fed is an organization owned by its member banks. The majority, if not the entirety of what the Fed does these days is to preserve the integrity and solvency of its member banks and to allow the US to refinance its debt on a continuous basis. [period]
The continuance of the economy, such as it is and such as the Fed would undoubtedly like it to return to, is IMHO a by-product. Undoubtedly, the destruction of the values embedded in the mortgage market weighs heavily on the Fed as it is a giant component of the outstanding debt in the system.
But the Fed abandoned its original mandate long ago and the quickest way to discern why they do what they do today, under current circumstances, is to ponder what effect it has on the member banks before going all fuzzy with “low unemployment” and “low inflation” ideas.
“I remain scratching my head as to why The Fed MASSIVELY intervened when both housing and mortgage refinancings are improving”
Are people really that STUPID! What the FED is doing is, and always has been about bailing out there big banker buddies. The banks have crap on there balance sheets that they created. Ben is taking it off there hands at the expense of the US. There has been one continuous bailout via creating money out of thin air. This of course actually causes the economy to go downhill. This is the greatest transfer of wealth in the history of the entire world.
Yet everyone is walking around like they are on Soma, and just can’t figure out that they are being had.
Money laundering for the election.
Nailed it. There simply is no other explanation and people can’t seem to figure this out. Has anybody ever wondered where all this money is going?? The banks aren’t lending it, so where is it going?
Yet, people go merrily along thinking everything is fine and the gov’t will save them.
The former right now, the latter in a few months.
“I remain scratching my head as to why The Fed MASSIVELY intervened when both housing and mortgage refinancings are improving.”
Perhaps because if interest rates move to normal post-war levels, the federal deficit will skyrocket, the housing market will crash, and the economy will be plunged into a depression?
This was all avoidable. But Obama could not resist the power to remake America with trillions in borrowed money. We are now stuck between ZIRP forever and the above consequences.
Everyone knows that inflation for necessities has skyrocketed. Interest rates are phony, but as you said, if the MARKET controlled rates now, the national debt would double!