The Impact of the Fed鈥檚 Mortgage-Backed Securities Purchase Program
Some of the big questions looming about the Fed鈥檚 exit strategy are if, when and at what pace the Fed should draw down its huge portfolio of mortgage backed securities (MBS). At its meeting on December 15-16, 2009, the Federal Open Market Committee announced that it was continuing its MBS purchases at a 鈥済radually slowing pace,鈥 but this will still leave $1,250 billion in MBS on the Fed鈥檚 balance sheet at the end of the first quarter of 2010. Another, more long-term question is whether such price keeping operations鈥攁 term used by Peter Fisher, who once ran the trading desk at the New York Fed (Fisher, 2009)鈥攕hould be a regular part of monetary policy in the future. Brian Sack, who now runs the trading desk, concludes in a recent speech that they should be (Sack, 2009).