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Fed Watch: Congratulations, you just bought $61.3 Billion in Mortgages

 The Fed over the past two weeks has significantly increased its balance sheet exposure to Mortgages and pumped huge amounts of money into the economy.  If you had supposed that the Fed is winding down their unprecedented foray into what was once the private sector, you would be mistaken.  In fact the Fed is actually increasing their exposure.  

Starting three weeks ago they purchased $53.2 Billion in Mortgage Backed Securities as can be seen on their balance sheet Feb 18th release (See http://bit.ly/aQCIbB). This week they followed up with a cool $8.2 Billion bringing the two week total to $61.3 Billion (Seehttp://bit.ly/bmBwxn).   For a reference, the Fed has given Fannie Mae $60.9 Billion, Fredie Mac $50.7 Billion and GMAC $17.3 Billion.  The total amount of Mortgage Backed Securities on their balance sheet is over $1 Trillion, which dwarfs the amount given to any single company during the bailout.  

The total increase of the balance sheet for the two weeks was $36.2 Billion due to offsetting securities, i.e. trading safer securities for Mortgage Backed Securities.  Quantitative Easing, as the Fed calls it, or Printing Money as others call it has always led to either inflation bubbles (See http://bit.ly/9M1dIh), which in turn leads to real price decreases in all financial assets, particularly housing (See http://bit.ly/b9NyLb).


Disclosure: SPX,