Chairman of the Federal Reserve Ben Bernanke is confident he can successfully bring a halt to the buying of mortgage backed securities that have helped steady the US housing market. Congress seems to lack that confidence. The central bank will have to put a stop eventually to its stimulus programs before there's a wave of inflation as the recovery continues. At the center of its programs is a plan to purchase $1.25 trillion worth of real estate debt.
Bernanke hopes that private investors will step in when the Fed puts an end to its debt-purchasing program. If they don't the Fed may come under pressure to provide continued housing assistance and credit programs. That pressure would hinder the Fed's capability in conducting independent monetary policies.
In a worst case scenario for the Fed, Congress could step in and attempt to stop the Fed from selling their debt claiming that a full recovery has not yet happened. Several Congressman have already pressured Bernanke to help car companies and create more credit for commercial real estate companies.
Officials with the Fed claim the housing debt purchasing has lowered borrowing costs for homebuyers, providing a spark to the portion of the economy at the center of the crisis. The average interest rate for a 30 year mortgage has gone from 6.45% a year ago to 5.02% last week. This rate could climb as much as a full percentage point by March while the economy gets stronger and the Fed halts its debt purchasing.
New home sales dropped unexpectedly in September as the $8,00 tax credit for first time buyers nears an end. Democrats in the Senate, fearing the housing recovery could be derailed, decided to extend the credit and provide assistance to present homeowners.
The purchasing of mortgage debt are a part of the expansion of the Fed's powers under Bernanke, who took over in 2006. Representative Ron Paul is attempting to pass a bill that would allow Congress to audit the Fed's monetary policies. The bill has over 300 co-sponsors.
Last December, when Congress was deciding on bailout assistance for Chrysler and GM, Bernanke was asked about Fed policy by Congress and the Chairman responded by saying the issue was for Congress to decide. Then in July, members of Congress asked the Fed to aid the commercial mortgage securities market by continuing the Fed's Term Asset-Backed Securities Loan Facility through the end of next year. The Fed partially complied by extending the program through the middle of 2010. They said that plans to extend the program were already in the works before being asked.
Ron Parks has been buying Marin real estate for 27 years. Year after year he is one of Marin's top real estate agents. Ron specializes in all areas of Marin County, including Belvedere and Mill Valley. Article Source: http://EzineArticles.com/?expert=Ron_S_Parks |
