Just an FYI.  Here’s the chart showing their holdings over time:

That’s a little over $4000 per person or, perhaps more meaningfully, about $10000 per household.  I’m not sure what to make of that.  $10k per household is significant but not obviously ridiculous – at least it doesn’t seem so to me.  What fraction of the mortgage market do you figure that amounts to?   10%?  Gotta be less than 50%.  The Fed holds about 10% of all mortgage debt outstanding and about 45% of securitized mortgage debt.  (Provided I understand Line 59 of that link correctly.)  I have no inherent objection to the Fed holding a large fraction of mortgage debt but I have to wonder, “Why were the people who were holding those securities so happy to sell?”  (If you’re sitting at the poker table and you can’t tell who the sucker is then it’s you.)

On the theme of Fed holdings of mortgage-backed securities, a recent post by Binyamin Applebaum in Economix (emphasis mine):

A new study finds that the Federal Reserve should keep buying mortgage-backed securities even as it stops buying Treasury securities, and even as it sells off its existing holding of Treasuries and mortgage bonds.

The study supports the Fed’s basic argument that buying bonds can help the economy, but it argues that the Fed made crucial mistakes in creating its bond-buying program, and that the Fed is at risk of compounding those errors.

Buying mortgage bonds has a larger economic effect than buying Treasuries, according to the study by Arvind Krishnamurthy, an economist at Northwestern University, and Annette Vissing-Jorgensen, an economist at the University of California, Berkeley.

But they found little economic benefit in holding mortgage bonds or Treasuries, a basic element of the Fed’s stimulus campaign… Professors Krishnamurthy and Vissing-Jorgensen argue that the Fed’s purchases of more than $2 trillion in Treasuries since the financial crisis have had “limited economic benefits.”  The purchases have cut the government’s borrowing costs, but they found little evidence for the Fed’s assertion that that has reduced borrowing costs for businesses and consumers.

More to follow I’m sure.

Addendum #1:  The Economist’s House Price Index appears highly correlated with Fed holdings of MBS.  So do Fed purchases of MBS actually influence price or is it just a correlation?

Addendum #2:  Could the Fed purchase assets other than treasuries or mortgage-backed securities to achieve a more significant benefit?  For example, a commenter on DeLong’s blog suggests that the Fed could provide a guaranteed market for state and local intrastructure construction/repair bonds.