The US Federal Reserve has given details of its aggressive moves to drive down mortgage costs for people buying homes.
It is doing that by purchasing mortgage backed securities. Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke announced the move in November, but now we know that process will start in early January and they will spend 500 billion dollars – 360 billion euros – by mid-2009. The programme covers securities issued by mortgage agencies Fannie Mae and Freddie Mac and the loan financer Ginnie Mae, all of which are government backed. It is part of Washington’s effort to break the grip of a deep housing downturn and severe credit crunch. That was caused by 2007’s subprime mortgage meltdown which led to the collapse of lending, first in the US and then around the world.