Aug. 28 (Bloomberg) -- The Federal Reserve may not need to buy the full $1.25 trillion in mortgage-backed securities the central bank has authorized by year-end, two regional Fed bank chiefs said.

Richmond Fed President Jeffrey Lacker said yesterday in a speech in Danville, Virginia, that he’ll evaluate “whether we need or want the additional stimulus” from buying the full amount. St. Louis Fed President James Bullard, speaking to reporters in Little Rock, Arkansas, said “it might not be necessary.”

The Fed’s program to buy $1.25 trillion in mortgage bonds guaranteed by Fannie Mae, Freddie Mac and Ginnie Mae is aimed at reducing home-finance costs and arresting the housing slump that triggered the recession. The central bank also intends to buy $300 billion of long-term Treasuries and $200 billion of federal agency debt.

Lacker and Bullard may be “staking out a position rather than reflecting the current consensus on the Federal Open Market Committee,” said Lou Crandall, chief economist at Wrightson ICAP LLC in Jersey City, New Jersey. The FOMC “is going to be much more concerned about how they manage the phasing out of the mortgage program because the Fed is providing a substantial percentage of the investment in conforming home loan bonds.”

The difference between yields on Washington-based Fannie Mae’s current-coupon 30-year fixed-rate mortgage securities and 10-year Treasuries widened 0.01 percentage point yesterday to 1.03 percentage point in New York, Bloomberg data show.

Lone Dissent

Lacker, 53, cast the lone dissenting vote in January against the FOMC’s commitment to continue buying agency debt and mortgage-backed securities. He has said the central bank should avoid favoring specific credit markets such as mortgages and consumer loans and instead boost the money supply with more “neutral” purchases of Treasuries. In 2006, the regional bank chief dissented four times in favor of higher interest rates.

While the comments by Lacker and Bullard suggest the Fed’s purchases may slow, the central bank disclosed yesterday that it had bought a greater-than-average amount of mortgage bonds for a second straight week, following a period of reduced purchases.

Net purchases totaled $25.4 billion in the week ended Aug. 26, compared with a weekly average of $23.3 billion since the Fed began the initiative in January, according to data posted on the New York Fed’s Web site and compiled by Bloomberg.

Analysts at JPMorgan Chase & Co. wrote in an Aug. 21 report that they found the size of the Fed’s purchases last week “surprising,” saying the increase might be related to an attempt to buy the entire $1.25 trillion by Dec. 31. After the latest week, the Fed has bought $792 billion, meaning purchases of more than $25 billion a week are needed to match that amount.

Disturb Markets

Lacker said it’s unclear whether an end to buying the securities will disturb markets. “Whether there is a so-called cliff effect or any disruption due to discontinuous change in our purchases is up in the air,” he told reporters after the speech.

While purchasing the full amount of $1.25 trillion in mortgage-backed securities may not be necessary, “even if we stop short, it would be close,” Bullard, 48, told reporters after a speech.

Bullard doesn’t vote on the FOMC until 2010. A former professor at the University of Missouri and Southern Illinois University, he joined the St. Louis Fed in April 2008, succeeding president William Poole.

The Fed decided this month to end purchases of $300 billion of long-term U.S. Treasuries in October amid signs the worst U.S. recession since the 1930s is ending.

To contact the reporters on this story: Steve Matthews in Atlanta at smatthews@bloomberg.net; Vivien Lou Chen in San Francisco at vchen1@bloomberg.net

Last Updated: August 28, 2009 00:01 EDT