Fed Will Buy $1 Trillion In Securities To Boost Economy

[babylonsister]

Fed to Buy $1 Trillion in Securities to Aid Economy

By EDMUND L. ANDREWS
Published: March 18, 2009


WASHINGTON — Saying that the recession continues to deepen, the Federal Reserve announced Wednesday that it would pump an extra $1 trillion into the mortgage market and longer-term Treasury securities in order to revive the economy.

“Job losses, declining equity and housing wealth, and tight credit conditions have weighed on consumer sentiment and spending,” the Fed said, adding that it would “employ all available tools to promote economic recovery and to preserve price stability.”

As expected, the Fed kept its benchmark interest rate at virtually zero. But in a surprise, it dramatically increased the amount of money it will create out of thin air to thaw out the still-frozen credit markets that have cramped lending to consumers and businesses alike.

Indeed, the immediate effect on the bond markets was striking, with prices rising and yields dropping sharply on the news. The yield on the 30-year Treasury bond, about 3.75 percent before the announcement, fell quickly to 3.4 percent and remained volatile. At the same time, the dollar plunged about 3 percent against other major currencies.

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http://www.nytimes.com/2009/03/19/business/economy/19fed.html?_r=1&hp

[babylonsister]

1. Federal Reserve buying bad & U.S. debt

Federal Reserve buying bad & U.S. debt
Posted March 18, 2009 3:29 PM
The Swamp

by Maura Reynolds


The Federal Reserve today announced an aggressive program to bolster the housing and credit markets by more than doubling their purchases of mortgage-backed securities and U.S. Treasury bills in an efforts to free up credit and lower mortgage rates.

The central bank said it was taking the unexpected action because the economy remains on life-support.

"Job losses, declining equity and housing wealth, and tight credit conditions have weighed on consumer sentiment and spending," the Fed's rate-setting committee said in a statement. "Weaker sales prospects and difficulties in obtaining credit have led businesses to cut back on inventories and fixed investment. U.S. exports have slumped as a number of major trading partners have also fallen into recession."

But the Fed said that the new purchases, combined with the government's upcoming program to stabilize banks, will help jumpstart the economy.

"Although the near-term economic outlook is weak, the committee anticipates that policy actions to stabilize financial markets and institutions, together with fiscal and monetary stimulus, will contribute to a gradual resumption of sustainable economic growth," the committee said.

The Fed said it would spend an additional $750 billion to buy mortgage-backed securities issued by Fannie Mae and Freddie Mac, bringing total purchases for 2009 to $1.2 trillion. And it would spend $300 billion to buy long-term U.S. treasuries, a move that is expected to lower interest rates for ordinary borrowers.

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http://www.swamppolitics.com/news/politics/blog/2009/03/federal_reserve_buying_bad_us.html