Ben Bernanke has made it official: QE3 Stimulus has now begun! The FED will begin pumping $40B into the economy each month, as long as necessary by buying Mortgage Backed Securities. And the FED begins buying Friday and expect to buy around $27B for the remainder of the month.
But wait a minute! Hasn’t Fannie and Freddy, 2 Government agencies been buying up most MBS’s from the banks over the past few years? And if the FED will now be buying MBS’s, doesn’t that put them in direct competition with both Fannie and Freddy? And what good does it do to have these MBS’s bought by the FED if Fannie and Freddie were buying most of them anyway? And to boot, how can the fed buy so much when the banks are not lending enough to warrant such buy backs? I’m confused!
Representative Paul Ryan, for one, doesn’t think this plan will work. “Ryan said QE3 might help banks on Wall Street but will do little to help middle-class families.” I tend to agree. I’ve seen the stock market rally as everyone said it would, seen oil and gas prices spike and have noticed food prices are already inching up.
As the dust settles on this issue, I will write again trying to shed more light on this newly released government program.