Yesterday the Fed announced that it would begin to buy mortgage and other private debt securities -- easily the most dramatic and unprecedented action in the Fed's 95-year history. Mortgages immediately fell a half-percent to 5.5 percent. An immense volume of loan-rate locks has pushed rates back up a bit today, but the decline is highly likely to resume. For the first time in the last 18 months' credit-market nightmare the authorities have moved in front of the crisis, jumping past broken banks to fund the nation. The Fed buys and sells short-term T-bills every day, managing monetary policy and short-term rates. However, the only prior Fed direct-purchase intervention to push down long-term rates was during and shortly after World War II, and that operation was limited strictly t...
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