In yet another turnaround for holders of mortgage-backed securities, the Federal Reserve announced it will buy $600 billion in such assets.
Attempting to deal with the financial crisis, the Fed says it will purchase up to $100 billion in direct obligations from Fannie, Freddie, and the Federal Home Loan Banks. Another $500 billion in mortgage-backed securities will round out the picture.
Firing all the ammunition would seem to be the general strategy, as the Fed combines this new initiative with additional incentives to unfreeze the consumer debt market — including $200 billion to security holders backed by various types of consumer loans.
Will this effort stave off the deepening recession? Only time will tell. In any case, it seems that investors in distressed assets can once again look to a powerful financial institution for backing. This can only mean greater opportunity for those knowledgeable enough to take advantage of this latest move.
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