The Real Deal Miami

Fed to reinvest in government debt

August 10, 2010 03:45PM

The Federal Reserve is planning a renewed effort to buoy the economy by reinvesting the proceeds from its vast mortgage portfolio into long-term Treasury securities, officials announced today. The central bank bought $1.25 trillion worth of mortgage-backed securities in its first attempt to prop up the economy, plus an additional $200 billion in debt owed by government-backed companies like Fannie Mae and Freddie Mac. The purchases were completed in March, and while the central bank had previously planned to allow its mortgage holdings to diminish over time, officials suggested today that the economy isn’t yet ready to recover on its own. “The pace of economic recovery is likely to be more modest in the near term than had been anticipated,” the Federal Open Market Committee said in a statement. “To help support the economic recovery in a context of price stability, the Committee will keep constant the Federal Reserve’s holdings of securities at their current level.” [Bloomberg] and [NYT]