Fed’s Stein Says Benefits of Third QE Plan Outweigh Risks

Federal Reserve Governor Jeremy Stein said diminishing returns from Fed purchases of Treasury securities indicate the central bank should instead buy mortgage-backed debt.

“MBS purchases may offer a better cost-benefit profile than Treasury purchases in the current environment,” Stein said today in a speech at the Brookings Institution in Washington. Because corporate borrowers can already secure inexpensive credit, “it is natural to focus on a sector that is more sensitive to financing costs,” he said. “The housing market would seem to fit this bill.”