The $3,383,605,000,000 the Treasury owed to the public as of the morning of Nov. 23, 2001 was less than the $3,391,826,000,000 in Treasury and mortgage-backed securities owned by the Federal Reserve as of the close of business last Thursday. Thus the Federal Reserve now owns more debt in the form of U.S. Treasury securities and MBSs than the sum total of the publicly held debt that the U.S. government accumulated from George Washington’s administration into November 2001, during President George W. Bush’s first term. The mortgage-backed securities owned by the Fed are those that have been issued and guaranteed by Fannie Mae, Freddie Mac and Ginnie Mae. Ginnie Mae is government-owned corporation operated by the U.S. Department of Housing and Urban Development. Fannie Mae and Freddie Mac are congressionally chartered, government-sponsored enterprises, that are now held in conservatorships by the federal government. “Fannie Mae and Freddie Mac are chartered by Congress as government-sponsored enterprises (GSEs) to provide liquidity in the mortgage market and to promote homeownership for underserved groups and locations,” the Congressional Research Service explained in a report published this August. “They purchase mortgages, guarantee them, and package them in mortgage-backed securities (MBSs), which they either keep as investments or sell to institutional investors. In addition to the GSEs’ guarantees, investors widely believe that MBSs are implicitly guaranteed by the federal government. In 2008, the GSEs’ financial condition had weakened and there were concerns over their ability to meet their obligations on $1.2 trillion in bonds and $3.7 trillion in MBSs that they had guaranteed. In response to the financial risks, the federal government took control of these GSEs in a process known as conservatorship as a means to stabilize the mortgage credit market.” The federal government first took control of Fannie Mae and Freddie Mac on Sunday, Sept. 7, 2008. In its last weekly accounting sheet released before that, on Thursday, Sept. 4, 2008, the Fed said that it owned $479.726 billion in U.S. Treasury securities. That sheet did not even include a line item for mortgage-backed securities.
Posted on: Tue, 24 Sep 2013 06:07:18 +0000
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