Bernanke’s Doctrine: Fed Mulls Purchases of Mortgage Backed Securities

From the Wall Street Journal. (bold emphasis mine)

Federal Reserve officials are starting to build a case for a new program of buying mortgage-backed securities to boost the ailing economy, though they appear unlikely to move swiftly.

The idea would be to target any new efforts by the central bank at the parts of the economy that are most severely impeding a recovery—the housing and mortgage markets—by working to push down mortgage rates.

Lower mortgage rates, in turn, could encourage more home buying and mortgage-refinancing, and help the economy by freeing up cash for consumers to spend on other goods and services. Mortgage rates are already very low, but some Fed officials believe they might be pushed lower. Moreover, Fed officials believe their past purchase programs helped to lift stock markets, by driving investors from low-risk investments toward riskier investments.

The Fed discussions occur amid broader efforts in the government to find ways to revive housing markets and stir refinancing.

"I believe we should move back up toward the top of the list of options the large-scale purchase of additional mortgage-backed securities," Federal Reserve governor Dan Tarullo said in a speech Thursday at Columbia University.

A new Fed mortgage-bond-buying program isn't a certainty. If inflation doesn't recede as many officials expect, or if the economy picks up with surprising vigor on its own, such a program might not win broad support inside the Fed.

I’ve been repeatedly saying that team Bernanke’s ‘ant-deflation’ policies have been meant to fire up the ‘animal spirits’ of the economy via the stock markets as the primary target.

It’s still been the same same same guiding path of policymaking for Bernanke et.al.

However so far, all these so-called variations of the next Quantitative Easing has remained as virtual reality...promises. Yet, even without QE, US money supply keeps growing robustly.