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Opinion
Brian Chappatta

The Fed Should Get Out of the Mortgage Market

Even central bankers are starting to wonder why they’re adding $40 billion of housing debt every month.

The mortgage-backed securities market would function just fine without central-bank meddling.

The mortgage-backed securities market would function just fine without central-bank meddling.

Photographer: Frederic J. Brown/AFP/Getty Images

If the Federal Reserve is truly as outcome-based as it claims to be under its new policy framework, it should start winding down its purchases of mortgage-backed securities. The fact that it’s not even thinking about doing so is revealing about just how hesitant it is to make even the slightest tweaks to monetary policy at this point in the economic recovery.

Lost in the shuffle last week amid all the Fedspeak about inflation and Friday’s shocking jobs report were comments from Boston Fed President Eric Rosengren. “My own personal view is that the mortgage market probably doesn’t need as much support now. And in fact, one of my financial stability concerns would be if the housing market gets too overheated,” he said. “I do think that as we think about tapering one of the things that we are going to have to think about is at what speed we taper the Treasuries versus the mortgage-backed securities.”