Industry NewsMarkets & Economy

Fed seeks to avoid Great Depression II

Commentary: Just in time for Thanksgiving

Don't miss the real estate event of the summer
Join 4,000 real estate pros at Connect SF, Aug 7‑11, 2017

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 to Treasurys. This time the Fed will buy a wide spectrum of consumer credit, driving down rates, and will eventually reopen private markets in volume. The Fed's actual purchases will not begin until ...