Fed Spends Another $1.2 Trillion On Bailout

by Chris Sturr | March 18, 2009

Another trillion plus to lower mortgage rates? Is this really supposed to help anything?

From the Washington Post:

The Federal Reserve said today that it will deploy an additional $1.2 trillion to try to lower interest rates and stimulate the economy, an aggressive move aimed at containing the recession.

The central bank will increase its purchases of mortgage-backed securities by $750 billion, on top of a previously announced $500 billion. It also will double its purchases of debt in Fannie Mae and Freddie Mac to $200 billion. Those steps are intended to lower mortgage rates. The announcement of the previous purchases pushed mortgage rates down a full percentage point.

The Fed also said it will buy $300 billion in long-term Treasury bonds, a step it had previously considered but had been reluctant to act on. That move will lower long-term interest rates for the U.S. government directly and, Fed officials hope, will indirectly lower borrowing costs for businesses and individuals.

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  1. Is this really supposed to help anything? Actually yes. Lower interest rates = lower monthly payments. Right or wrong, that’s the only thing most people look at.Joe B.

  2. Joe,Understood, but in market where overinflated prices are still falling back to historical norms, this will provide very little bang for the megabucks.

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