Jim wrote:
I heard -- and I'd like to have it confirmed -- that the Fed was willing to accept mortgage-backed securities as collateral on discount loans. That's a lot like buying the mortgages themselves (but not the same thing). ========================== Yes, I recall reading early last week - probably in the WSJ - that the Fed invited dealers to provide it with MBS's instead of Treasuries as repo collateral. I don't know why or remember the explanation if there was one. Maybe because the banks can't move their MBS inventories and want to hang on to their more liquid Treasuries instead? But they get the MBS's back when the repos expire in any case, don't they? Or is this all preparation for the Fed going the next step and buying the MBS's outright? Is it limited by law as to what securities it can buy through open market operations or accept as collateral for loans through the discount window?
