Here are some numbers. Roughly a third of
trash "repaid" by the end of 2011, the question
is how. Banks not lending and F&F are in chit, and
the Fed is holding most toxic assets that are supposedly
refinanced away? Hard to believe...
"The Federal Reserve did not hold the size of its securities
portfolio precisely constant after it ended its agency
purchase program earlier this year. Instead, consistent with
the Committee's goal of ultimately returning the portfolio to
one consisting primarily of Treasury securities, we adopted a
policy of re-investing maturing Treasuries in similar
securities while allowing agency securities to run off as
payments of principal were received. To date, we have realized
about $140 billion of repayments of principal on our holdings
of agency debt and MBS, most of it prior to the end of the
purchase program. Continued repayments at this pace, together
with the policy of not re-investing the proceeds, were
expected to lead to a slight reduction in policy accommodation
over time.
However, more recently, as the pace of economic growth has
slowed somewhat, longer-term interest rates have fallen and
mortgage refinancing activity has picked up. Increased
refinancing has in turn led the Fed's holding of agency MBS to
run off more quickly than previously anticipated. Although
mortgage prepayment rates are difficult to predict, under the
assumption that mortgage rates remain near current levels, we
estimated that an additional $400 billion or so of MBS and
agency debt currently in the Fed's portfolio could be repaid
by the end of 2011." |
