By flooding the market with money, the Federal Reserve just accidentally pushed mortgage bankers to the brink of bankruptcy.
- The Federal Reserve just bought $250 billion of mortgage-backed securities in a bid to strengthen the markets.
- But the move caused a tsunami of margin calls across the mortgage banker industry. Some warned they could go bankrupt within days.
- Homebuyer demand has dried up and millions of mortgage delinquencies loom.
The Federal Reserve unloaded its bazooka of stimulus all over the markets in the last two weeks. But there’s some major collateral damage. By flooding the markets with money, they may have accidentally trigged a housing market crash.
The Mortgage Bankers Association (MBA) warned of ‘large scale disruption’ to the housing market and accused the Fed of using a ‘sledgehammer.’
This is a collapse of the system.