FED officials in high and powerful positions keep talking about another round of security purchases focused on mortgage-backed securities (MBS). Do they not know that there is a new Federal Reserve-Treasury Accord in place in which the FED agreed “to avoid credit risk and credit allocation.” Specifically, “The Federal Reserve’s lender-of-last-resort responsibilities involve lending against collateral, secured to the satisfaction of the responsible Federal Reserve Bank. Actions taken by the Federal Reserve should also aim to improve financial or credit conditions broadly, not to allocate credit to narrowly-defined sectors or classes of borrowers. Government decisions to influence the allocation of … Continue reading The FED Agreed Not To Allocate Credit