US Fed starts program of purchases of mortgage securities
Agence France-Presse | 01/06/2009 12:42 AM
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WASHINGTON - The Federal Reserve said Monday it began buying troubled mortgage securities through investment managers, kicking off a program expected to spend up to 500 billion dollars to ease a credit crisis.
A statement from the New York Fed said the program announced in November had begun, and that details of the first purchases would be made known on Thursday.
The program was announced in late November as another step in fighting a credit crunch stemming from the collapse in housing that has now engulfed the financial sector and is choking economic activity.
The New York Fed, which will carry out the purchases, selected four investment managers for the program: BlackRock, Goldman Sachs, PIMCO and Wellington Management Company.
The central bank had already begun on its own purchasing up to 100 billion dollars in mortgage-backed securities and will buy up to 500 billion more through these investment firms.
The new efforts are part of a move to restart consumer credit markets that froze up in October and to get more liquidity and bring down borrowing costs for the housing market, which is at the center of the economic storm.
The program will buy up troubled assets from Fannie Mae and Freddie Mac, two major government-sponsored enterprises that were taken over by the Treasury earlier this year to avert collapse, and of securities backed by Ginnie Mae, a guarantor of mortgage debt.
The central bank is taking over the purchases of troubled mortgage debt, which originally had been intended under the Treasury's 700-billion-dollar rescue approved by Congress known as the Troubled Asset Relief Program.
