Fed plans its housing market spending
TEXT OF STORY
Steve Chiotakis: While things seem to be settling down in the world of finance these days, everyone, including the Federal Reserve, is looking to the future. Big question now? How are they going to get all of the money they pumped into the economy back out again? Marketplace’s Amy Scott reports on one key program.
Amy Scott: Since the start of this year, the Fed has been propping up the housing market by buying mortgage-backed securities. Yesterday, the Fed said it plans to spend a total of $1.25 trillion on the program.
Economist Lou Crandall at Wrightson ICAP says all that money has helped keep mortgage rates low:
Lou Crandall: At a time when other institutions weren’t ready to commit money to the mortgage market, the Fed provided a steady, reliable flow of funding.
With the housing market showing some signs of recovery, the Fed now says it will slow down the pace of those purchases and be done by the middle of next year.
Joseph Brusuelas is with Moody’s Economy.com:
Joseph Brusuelas The Fed’s making a calculated bet that the economy has left recession, has entered recovery. It’s going to slowly withdraw from financial markets.
Slowly, so that interest rates don’t shoot up as soon as the Fed pulls out. But Brusuelas predicts it will still cost more to take out a home loan.
In New York, I’m Amy Scott for Marketplace.
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