The Fed Now Owns Nearly One Third of All US Mortgages

Mish

The Fed's balance sheet is ballooning out of control.

Nearly $7 Trillion in Securities, $2 Trillion Mortgages

As of August 26, 2020 the Fed's Balance Sheet is nearly $7 trillion total of which $3.7 trillion are notes or bonds, and nearly $2 trillion in mortgages (Fannie Mae, Freddie Mac, or Ginnie Mae).

No End in Sight to Fed's Mortgage Buying Spree

Bloomberg reports No End in Sight to Fed's Mortgage Buying Spree.

Key Points

  • The Fed has snapped up $1 trillion of mortgage bonds since March. It bought around $300 billion of the bonds in each of March and April, and since then has been buying about $100 billion a month. 
  • The Fed now owns almost a third of bonds backed by home loans in the U.S. 
  • Buying the securities has pushed mortgage rates lower, with the average 30-year rate falling to 2.91% as of last week from 3.3% in early February.
  • Morgan Stanley analysts pointed out in late March that the buying was running at eight times the pace seen in prior episodes of Fed purchasing under programs known as quantitative easing.
  • Just before this latest round, principal payments from its mortgage bond holdings had whittled that down to 21%, but it has now increased back to 30%. 
  • If the Fed maintains its current buying pace, it will again own 34% of the mortgage universe by year’s end.

Fed's Balance Sheet Expansion Over Time

Fed's Balance Sheet 2020-08-26A

Questions of the Day

  • Does the Fed have everything under control?
  • Is the Fed totally out of control?

Mish

Comments (84)
No. 1-30
Casual_Observer
Casual_Observer

Welcome to MMT.

California failed to pass either the wealth tax or tax increases on millionaires.

CzarChasm-Reigns
CzarChasm-Reigns

I bet the Fed sees it as 2/3rds left, before there is a "problem".

Tony Bennett
Tony Bennett

"The Fed's balance sheet is ballooning out of control."

...

Relatively flat past 3 months and mostly govt backed stuff. The corporate / muni stuff (bought via SPV) not large scale. If this changes ... or equity purchased ... then I will worry (a lot).

Jmurr
Jmurr

I think we’re turning Japanese. I really think so.

Sechel
Sechel

wonder if and how they hedge that risk both duration and convexity. being they are long fixed income they can't really go short treasuries. do they need to mark to market and hedge at all?

Vigorish
Vigorish

Powell, are you pondering what I'm pondering?

Yes, I think so, Brain, Google Translate is a great tool to re-brand Fed policy into sophisticated-sounding Japanese.

Bam_Man
Bam_Man

"To own the world in fee simple."

gregggg
gregggg

Eventually, money printing produces negative growth. Looks like we have arrived at our destination.

Curious-Cat
Curious-Cat

Anyone know is there a good site that is a primer on the effects of the Fed buying bonds, securities and mortgages?

ColoradoAccountant
ColoradoAccountant

You guys are smart, really, really smart. Otherwise you wouldn't be reading Mish. He got out of Illinois. You need to get out of USD, For the children.

Maximus_Minimus
Maximus_Minimus

In the Soviet Union it was almost 100%, so it's on the right trajectory.

AWC
AWC

Certainly, the Fed will send all that valuable paper over to it’s private partner, Blackrock? For safe keeping, mind you ;-) .

bradw2k
bradw2k

Real question: why are mortgage rates still at 3% when treasuries pay less than half of that?

JonSellers
JonSellers

Trump and the treasury are out of control.

nzyank
nzyank

In the absence of coherent fiscal policy, it is the only thing the Fed can do. Unfortunately it is causing a stock market bubble, as the Fed's liquidity injections have to go somewhere. Meanwhile, on main street....

nzyank
nzyank

Multiplier effect - for every dollar the Fed puts back into the market through asset purchases, the stock market goes up by $10. Its called Trumponomics....

dr smock
dr smock

Capitalism is gone, the federal reserve is a private, criminal organization, and the people are getting angrier and angrier. This has been going on long before Trump. So, when do the mobs figure it out and start to kill or imprison members of this elite group of gangsters?

PecuniaNonOlet
PecuniaNonOlet

So capitalism will be replaced by fed feudalism. Now I know everything.

Eddie_T
Eddie_T

I'm hoping to use the resulting low rates to refi one more time to reduce my debt service, and possibly add another property, depending on whether I can find something that is still within reason....getting harder to find value these days. I'll probably wait and see if RE prices take a real hit..maybe next year. My plan is to use the Fed's manips if it benefits me. But only to buy tangible assets...no stocks or ETF's.

lol
lol

Get real,that's there "official" balance sheet,the real balance sheet,the one's that nobody but the banksters and elites sees is well north of a quadrillion dollars and rising a trillion every single day. That 7 tril is chump change,they pump more than that into the stocks in a month!Thefedhas been buying everything since 08...Do the math!

msurkan
msurkan

What about the percentage of mortgages that are insured by the government entities like FHA and VA? Also, I am very curious how the percentage of NEW government entity subsidized mortgages has been changing (e.g. Fannie, Freddie, FHA, VA) and whether that share of the market has changed much in 2020.

Rocky Raccoon
Rocky Raccoon

Sounds like a simple way to remove the right to private property... Jefferson did warn us of such central banking scams.

KyleW
KyleW

What does this mean? What are the potential consequences? Cheap money fueling another housing bubble? The government getting stuck with foreclosed properties? Is it a threat to the dollar as this could mean massive losses for the government?

PDiddio
PDiddio

Love the convo, folks. I don’t think you can look at the balance sheet without looking at assets along with the liabilities. When you start to frame the assets of the U.S. (not income/GDP) I think we still have a long way to go. In a similar context, I think neither presidential candidate would intervene militarily should the Chinese want to exert Hong Kong-esk control over Taiwan/South China Sea or maybe make a move on the Korean Peninsula. That doesn’t mean that we wouldn’t be open to economic concessions like forfeiting their Treasury/U.S. debt holdings.

Czero
Czero

If you take a look at Trump's career-making deal in NY in the 80's, you will see that the exact same scenario is playing out now...on the National scale. Only a matter of snatching up properties rendered massively cheap via legislation. Trump and/or business associates will biy those worth holding over the next couple years. It is PRECISELY the same manuever.

Xiola21
Xiola21

I don't know what's going to happen, but I want to get my kicks in before this whole $h!+ house goes up in flames

Johasen
Johasen

Great work ahead. https://www.lvtimes.org/

RebelRand
RebelRand

The Fed is juicing the markets like a Heroin pusher and the markets are junkies. Constantly needing that next fix or withdrawal syndrome sets in. The heroin is getting cut more and more making them junkies needing more to catch the dragon. Is the market gonna OD or is the heroin gonna become worthless junk.


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