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Economic Brief

April 2014, No. 14-04

The First Time the Fed Bought GSE Debt

Renee Haltom and Robert Sharp

In 1966, Congress gave the Federal Reserve authority to purchase the debt of agencies guaranteed or owned by the federal government. This same authority has enabled the Fed's purchases of mortgage-backed securities (MBS) and debt of government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac since 2008 in support of the housing market. In a little-known episode, the Fed shied away from exercising this authority in the 1960s but eventually conceded under political pressure and perceived threats to its independence.

Additional Resources

Burns, Arthur F., Statement before the Subcommittee on Economic Stabilization, Committee on Banking, Currency and Housing, U.S. House of Representatives, October 23, 1975.

Cook, Timothy Q., "Regulation Q and the Behavior of Savings and Small Time Deposits at Commercial Banks and the Thrift Institutions," Federal Reserve Bank of Richmond Economic Review, November/December 1978, vol. 64, no. 6, pp. 14-28.

FOMC Rules and Authorizations, "Guidelines for the Conduct of System Open Market Operations in Federal-Agency Issues."

FOMC Transcripts and other Historical Materials.

FRASER, Federal Reserve Archive.

Goodfriend, Marvin, "The Elusive Promise of Independent Central Banking," Monetary and Economic Studies, November 2012, vol. 30, pp. 39-54.

Lacker, Jeffrey M., "Government Lending and Monetary Policy," Speech to the National Association for Business Economics 2009 Washington Economic Policy Conference, Alexandria, Va., March 2, 2009.

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