March 31st is upon us and the Federal Reserve Bank is poised to pick up their marbles and go home. They’ve spent those 1.25 trillion dollars on all those U.S. mortgage-backed securities and now they’re getting out of the game. But who’s picking up the slack?
Amidst the cacophony of speculation, are other investors magically going to appear out of the mist and begin buying these mortgage-backed securities?
If not, what is the fate of interest rates – where are they going to go? We’ve heard increase projections between 6 to 7 and even 8%! But frankly, we’ve got as much chance of predicting what will happen at the end of next week or the end of next month or year as we do picking winning Lotto numbers.
According to the January 20, 2010 quarterly TARP report to Congress, “The Government has done more than simply support the mortgage market, in many ways it has become the mortgage market.”
At the end of the day, government intervention once again played a huge role in staving off disaster, but by dipping that big toe in the pond they stand to create an awful lot of ripples when they take that big toe out.