"The heart of quantitative easing and ZIRP (zero interest rate policy) is the Fed's direct purchase and ownership of assets: residential mortgage-backed securities and Treasury bonds.The Fed has been operating not as the buyer of last resort but as the bidder who buys interest-sensitive securities to keep interest rates near-zero (known as financial repression).
The Fed's purchases of impaired mortgages has also made its balance sheet "the place where mortgages go to die:" the Fed can hold impaired mortgages until maturity, effectively masking their illiquidity and impaired market value."
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