Friday, November 13, 2009

Current Status of Fed MBS Purchases

Through November 11, the FRB NY has just surpassed the $1T level with net purchases of Agency MBS. Over $200B of these purchase transactions have yet to settle so the amount recorded in the H.4.1 Report is only at $775B as a factor affecting bank reserves.

The weekly rate at which the NY Fed is purchasing these securities has slowed over the weeks since the Fed announced that this program would be extended into 1st quarter 2010, from $25B per week to lately around $16B per week. The graph below is as of this week.

This is probably the first time that such a focused Fed program has surpassed the $1T level.


googleheim said...

Is the Fed ( along with Tsy )
forcing any banks to fail so they can gobble up assets in anticipation of selling them later at a profit such as that in the RTC resolution trust company after the Savings and Loans Crisis of the late 80's ?

Matt Franko said...


I dont think so per se. It looks like to me they are taking them week by week as FDIC resources allow. The FDIC just has limited resources to wind these banks down.

BTW I think CIT, and a big bank that failed in San Fran last week both passed the "stress test" of a few months ago. The stress test model predicted max about 8.3% unemplyment and as you know we are now 10.2% and rising. GMAC is a third bank that passed stress test and is now in DC allegedly desiring $3B more in TARP money.

Goog, this banking issue and the Fed MBS purchases now pale in comparison to the news the Obama Admin put out late Friday afternoon that they are considering across the board 5% spending cuts and tax increases to reduce deficit...this is potentially a DISASTER ahead of us. Mike is on it thru his monitoring of the daily/YoY fiscal situation, stay tuned...