ECB least, Bank of England most and Federal Reserve sort of interested in intervening in the Mortgage Securities Markets to halt housing collapse
Kirsten McLauren
Mar. 22, 2008

Federal Reserve (Fed) and Bank of England (BOE) may soon move forward in mass purchases of mortgage-backed securities (MBS) in a bid to solve the global credit crisis. European Central Bank opposes the idea in principle but may agree to go ahead with it to help Fed and BOE.

The sub prime mortgage crisis has now spread to prime mortgage assets in the US. Bear Sterns collapse shows that the fire has now reached the ‘bed rooms’ of the world economies.

A joint intervention will buy US (mainly) mortgage backed securities with dollar. That helps in two ways. It creates a possible boom in real estate market. It also lifts dollar from the slump. The effect on dollar is a big reason why ECB may go along with it.

Expect some kind of coordinated interventions. It will be bullish for economies, US Dollar and real estate markets. It will also create inflation, as money supply will increase. Perhaps it is needed to get out of the apparent deflationary meltdown in credit markets.

ECB least, Bank of England most and Federal Reserve sort of interested in intervening in the Mortgage Securities Markets to halt housing collapse
Kirsten McLauren
A joint intervention will buy US (mainly) mortgage backed securities with dollar. That helps in two ways. It creates a possible boom in real estate market. It also lifts dollar from the slump.
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