Fed To Buy Mortgage-Backed Securities

December 31, 2008

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December 31, 2008

In an effort to boost the housing market, the Federal Reserve announced Tuesday it would begin purchasing mortgage-backed securities early next month. The Fed is expected to purchase $500 billion worth of the securities that are guaranteed by home loan giants Fannie Mae, Freddie Mac and Ginnie Mae. Officials announced the plan in November but did not say at the time when it would begin.

STEVE INSKEEP, host:

NPR's Business News starts with the government's plan to purchase toxic assets.

The Federal Reserve says it's going to purchase $500 billion worth of mortgage-backed securities by mid-2009. We're at that point where $500 billion is a big story, but the not the biggest story, even of the day, $500 billion. The securities consist of pools of home mortgages, many of them subprime, as they're called. Before the housing crisis earlier this year, they were bundled together and sold to investors. And nobody wants to buy them now, nobody knows what they're worth. The original bailout plan, passed by Congress last year, anticipated that the Treasury Department would buy these securities. In the end, the Treasury did something else with its money, but now the Fed will spend that 500 billion.

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