During 2020-2021, the Federal Reserve's mortgage-backed security purchases functionally constituted a monetary transfer to wealthy homeowners: the Fed purchased MBS at high prices as homeowners refinanced into lower rates, with 44% of the Fed's MBS holdings issued in 2021 and a large portion bearing coupons of 2.5% or less, while the Fed will realize $400 billion in losses on these holdings when interest rates rose
causalpending
Speaker
Peter StellaEvidence Quote
“really a huge part of the fed's accumulation of MBS during that period was the reinvestment of prepayments on mortgages...44 of the fed's MBS Holdings were issued in 2021”
Source
Debt Death Spirals, Fed's Losses, & Fiscal Theory Of Price Level | Peter Stella & Joseph Wang— Forward GuidanceCreated: 8/10/2026, 10:58:24 PM
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