Federal Reserve Chairman Ben S. Bernanke's decision to buy Treasuries and double his purchases of mortgage debt is part of his plan to avoid a Great Depression II. Benanke has decided to pump as much cash into the economy as needed to end the current crisis.
U.S. central bankers decided yesterday to buy as much as $300 billion of long-term Treasuries and more than double mortgage-debt purchases to $1.45 trillion, aiming to lower home- loan and other interest rates. The Fed kept its main rate at almost zero and may keep it there for an “extended” time.
With the purchases of Treasuries and housing debt, Bernanke is effectively using the Fed’s powers to print money and aim it where he and other officials believe it will have the greatest impact in lowering borrowing costs.
Fed Purchases: Bernanke's decisions will add $750 billion in purchases this year of mortgage-backed securities issued by government- sponsored enterprises Fannie Mae, Freddie Mac and Ginnie Mae, for a total of $1.25 trillion.
Term Asset-Back Securities Loan Facilities (TALF) Program: The $1 trillion TALF will probably be expanded to include other financial assets.
Balance Sheet: The moves may more than double the Fed’s balance-sheet assets by September to $4.5 trillion from $1.9 trillion. (Bloomberg.com, 3/20/09)