Tag Archives: Ben Bernanke

The Federal Reserve's announcement confirming a third round of quantitative easing sent long-term mortgage rates tumbling to all-new record lows this week. Freddie Mac's Primary Mortgage Market Survey showed a drop in both the 30-year and 15-year fixed. According to the survey, the 30-year fixed-rate mortgage (FRM) averaged 3.49 percent (0.6 point) for the week ending September 20, down from 3.55 percent the week before. The 15-year FRM also fell this week, averaging 2.77 percent (0.6 point). The previous survey showed an average of 2.85 percent.

The bank's Economics Group issued a special commentary in its Housing Data Wrap-Up for August 2012, examining the potential effects (or lack thereof) the Fed's new plan may have on housing and updating its forecast for the market. The Fed's influence should put downward pressure on long-term interest rates, but Wells Fargo says the benefits from such a move will be modest at best, citing already-low mortgage rates. The bigger issue at hand is the ""fiscal cliff,"" which has led to a slowdown in hiring and turned back gains in consumer confidence.

The Federal Open Market Committee announced Thursday a new plan to stimulate a moribund economy, continuing two earlier plans which at best stopped the economy from contracting. The FOMC said it would keep the federal funds rate near zero into mid-2015, six months longer than it had said previously. The FOMC voted 11-1 ""to increase policy accommodation by purchasing additional agency mortgage-backed securities at a pace of $40 billion per month.""

After a month of weekly increases, mortgage rates followed Treasury bond yields down this week. Freddie Mac reported that the 30-year fixed averaged 3.59 percent (0.6 point) for the week ending August 30, down from 3.66 percent in the previous week's survey. Bankrate's survey showed that the 30-year fixed average took a substantial tumble, falling to 3.80 percent from 3.91 percent before.

Acknowledging economic activity decelerated somewhat over the first half of this year and growth in employment has been slow in recent months, the Federal Open Market Committee nonetheless decided Wednesday to take no new actions to stimulate growth. Concluding a two day meeting the FOMC instead said it would maintain its low interest rate policy and continue previously announced programs to reinvest proceeds of maturing Treasury securities it already holds and extend the average maturity of its portfolio.

With a lone dissent, the Federal Open Market Committee Wednesday voted no change in the target federal funds rate but agreed to expand its program to stimulate the economy by purchasing Treasury securities. While voting no change in the target Fed Funds rate, the FOMC said it would purchase Treasury securities with remaining maturities of 6 years to 30 years at the current pace and to sell or redeem an equal amount of Treasury securities with remaining maturities of approximately 3 years or less. The action is expected to keep mortgage rates at record lows.

With a lone dissent, the Federal Open Market Committee Wednesday voted no change in the target federal funds rate. The economy has been expanding moderately, the FOMC said in the statement issued at the conclusion of its two-day meeting, echoing language in the statement following its meeting last month. After the meeting, the FOMC released its quarterly forecast of the economy and interest rates with more members of the Committee seeing higher rates in 2014 than in the prior forecast.

The economy continued to expand at a modest to moderate pace from mid-February through late March, the Federal Reserve said Wednesday in its periodic Beige Book, reporting faster and solid growth in Kansas City and Minneapolis but moderate or modest growth in Boston, Atlanta, Chicago, Dallas, San Francisco Cleveland and St. Louis. New York reported economic growth picked up somewhat while Philadelphia and Richmond cited improving business conditions.

If extremely severe economic conditions were to fall upon the U.S., 15 of the 19 banks tested by the Fed's stress scenario projections are said to be able to survive and continue to lend. The hypothetical stressful scenario included a 13 percent unemployment rate, 50 percent decline in equity prices, and a 20 percent decline in home prices. The scenario covers nine quarters into the fourth quarter of 2013, and the four banks that failed - Ally Financial, Citigroup, SunTrust, and MetLife - were said to have one or more projected regulatory capital ratios that fell below the 5 percent minimum levels at some point over the stress scenario horizon, according to the Fed.

With a common goal of economic recovery, Congress and the Federal Reserve diverge on the best means to that end. Should the housing sector finance the government's economic policies, or should the government help boost the housing sector? Federal Reserve Chairman Ben Bernanke submitted a white paper to Congress last week as a framework for policymakers to help the housing market, but that move has drawn the ire of at least one senator.