Gagnon’s $2 trillion plan for Fed MBS buys

October 28, 2011

QE3 to the max? Joseph Gagnon, a former Federal Reserve economist now at the Peterson Institute, argues on Reuters Insider the central bank should embark on another massive round of bond purchases, this time through another dose of help for the battered U.S. mortgage market.

The notion of MBS purchases appears to have significant support at the central bank, with both Fed Board Governor Daniel Tarullo and New York Fed President William Dudley recently voicing support for stepped up mortgage-bond purchases. In response to the 2008 market meltdown, the Fed purchased some $1.25 trillion in mortgage securities backed by failed government-sponsored entities Fannie Mae and Freddie Mac.

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