Fed plans major commercial mortgage buyback

Central bank said its Treasury and mortgage security purchases from a week ago are basically unlimited

Mar.March 23, 2020 09:21 AM
US Federal Reserve Chairman Jerome Powell (Credit: ERIC BARADAT/AFP via Getty Images)

US Federal Reserve Chairman Jerome Powell (Credit: ERIC BARADAT/AFP via Getty Images)

The Federal Reserve dramatically expanded its lending programs meant to unclog credit on Monday by expanding its facilities to include different types of municipal and corporate debt.

The Federal Open Market Committee said the Treasury and mortgage security purchases it approved a week ago are basically unlimited, according to the Wall Street Journal. It plans to buy $375 billion worth of Treasury securities and $250 billion worth of mortgage securities this week. It will also start buying commercial mortgage-backed securities that were issued by government-supported entities.

The Fed has been buying up mortgage-backed securities since the last recession to ensure that banks are able to provide financing to borrowers. The Fed’s purchase of mortgages allows banks to continue to originate new ones.

The Fed will also launch a trio of new lending facilities, including the Term Asset-Backed Securities Lending Facility. The central bank previously used this in 2008 to support business credit and consumer markets.

Another facility will lend to investment-grade companies, and the third will buy corporate bonds issued by highly rated companies in the corporate bond market. All three are meant to support $300 billion in new financing.

The Fed plans to soon unveil a Main Street Business Lending Program to support small and midsize businesses. [WSJ] — Eddie Small

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