Andrew Levin on the Costs and Benefits of QE4 and the Future of the Fed’s Balance Sheet
Macro Musings with David Beckworth
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The Fed's Balance Sheet - The First Key Finding in Your Paper
By summer and fall of 2020, we were in a housing boom. I think that should have led the Federal Reserve to seriously reconsider whether it was appropriate to be continuing to buy a large amount of agency mortgage backed securities. The idea that they would be adding fuel to the fire in the housing market is really hard to understand. QE4 markedly increased the Federal Reserve's footprint in the markets for treasuries and agency MBS with potentially adverse consequences for the functioning of these markets over time. It's no longer a kind of marginal player that's occasionally coming in from the sidelines but now owns 40% of all the outstanding mortgage-backed security issued during those two years.
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