Federal Reserve Spending Another $556 billion in Mortgage Market

Although the acquisition of mortgage-backed securities was scheduled to end in December 2009, the Federal Reserve has decided to continue acquiring the securities, with plans to pump another $556 billion into them by April 2010. Since January 2009 the Federal Reserve has already spend $694 billion of taxpayers dollars on them, bringing the end total to $1.25 trillion when they’re through with their spending spree. All of this is an attempt to hold interest rates down going forward.

Of all the 10 misguided Federal Reserve programs, this is by far the most costly to the taxpayers. The decision to continue the spending program was made by the Federal Open Market Committee on September 23, when they also asserted they were going to slow the acquisition of mortgage-backed down in order to “promote a smooth transition in markets,”.

Consequently the 30-year mortgage interest rate fell to 5.04 percent this week, it’s lowest level since May. Freddie Mac and other lenders sponsored by the government guarantee the debt, which isn’t something to generate confidence in any way.

So far, depending how you add up all the money spread around by the government so far in the crisis, it tallies to about $11.6 trillion so far. Somehow the Treasury Department wants to comfort us with the assertion that all this spending is backed up by assets. Yes, all the $11.6 trillion is backed up by assets. Really. Just ask them, they’ll tell you, even though they refuse to identify what those assets are, which prompted Bloomberg LP to file a lawsuit against the Federal Reserve in order to have that information made available.

A judge agreed that the information should be allowed to be accessed by the public, but it is now being appealed. If they were so confident in the collateral it would have obviously been revealed.

At this time banks have repaid close to $70.6 billion of the total $204.6 billion in direct aid via the Capital Purchase Program of the Troubled Asset Relief Program. The fund held $700 billion at the time Congress created it in October 2009.