Bernanke to Buy $40 Billion in Mortgage Debt a Month


The Feds will continue to bail out the financial system by buying $40 billion a month in mortgage debt/bonds [that’s billion with a “b”]. We are going to print the money to make the purchases of underwater houses so we can give money to the banks for lending. They probably won’t do much lending because of concerns about the future.

Bernanke believes this will boost consumer confidence and the flailing housing market.

Bernanke is going to keep using the same “innovative” approaches he has been using until he sees a “sustained” improvement.

He said that the QE’s have added 2 million jobs and raised the level of economic output by 3%. [We lost NASA and other high level jobs but Burger King is hiring, so it’s a wash]

Bernanke will “buy assets and sell liabilities.” He’s going to swap $667 billion in short-term mortgage debt for longer-term securities.

The zero-interest rate will continue through 2015 in an attempt to stimulate the economy.

Apparently the high unemployment is expected to continue for years and Bernanke’s “unconventional” approaches will continue until it improves.

Savers will suffer, people who hold our debt will suffer, but Wall Street likes it.

Republican presidential candidate Mitt Romney has said he wouldn’t reappoint Bernanke when his term ends in January 2014. Lanhee Chen, Romney’s policy director, said the announcement of QE3 is “further confirmation that President Obama’s policies have not worked.”

“We should be creating wealth, not printing dollars,” Chen said in a statement. [Bloomberg]

Senator Bob Corker of Tennessee said Bernanke’s policies damage the Fed’s credibility while doing little to spur the economy.

Small business confidence is not going to be boosted by this. Our economy might be better served by stability in government regulations and health care costs.

Read more at Bloomberg