As Fed's mortgage purchases end, eyes turn to investors

Reporting from New York - The government's $1.25-trillion program to prop up the housing market by purchasing mortgages came to an end Wednesday -- in a small, messy room at the Federal Reserve Bank of New York with four desks and a Nerf basketball hoop.

For the last year, a small team of traders has worked here to buy massive amounts of mortgages to fill the void left after institutional investors quickly retreated in the throes of the 2008 financial crisis, unable or unwilling to put money into the fast-melting mortgage arena.

The purchases have given the Federal Reserve its largest balance sheet ever and triggered fears of runaway inflation. But most analysts now credit them for lowering mortgage rates, providing a vital lifeline for the battered housing market.

"Something like this had never been tried on this scale before," said Mark Gertler, a former resident scholar at the New York Fed and an economics professor at New York University. "The fact that they got it mostly right is quite remarkable." via LATIMES. Full article after the jump