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American Capital Agency Corp. Message Board

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  • duckman939 duckman939 Aug 28, 2012 3:16 PM Flag

    OT: How Does Bernake Affect AGNC Friday

    I'm pretty sure that legally the Fed can only buy securities backed by the US government (i.e. agencies). Of course Bernanke has trouble reading and following the law.

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    • The FED does not have such a restriction. FED governance is by broad conceptual mandates not specific allowances and restrictions. The Federal Reserve has published a number of papers discussing what “Open Market Operations” other than buying US Treasuries it considered probable; after the US Treasury eliminated 30-year government bonds and reduced issuance of other securities. Of course that was when the budget was in surplus. It may surprise you to read that the FED has considered using private securities (corporate stocks and bonds) for open market operations. Other considerations are foreign government bonds, municipal and “Build America” bonds.

      Sentiment: Hold

    • Duckman, I think the FED can do what it deems necessary to prop up the economy.
      For example, they could go buy stocks if they want.
      They are not limited to buying securities backed by the US government.

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