Ben S. Bernanke

As Federal Reserve Chair led the institution through the financial crisis and the decade of unconventional monetary policy that followed. Those policies included multiple rounds of Large-Scale Asset Purchases (commonly QE1, QE2 and QE3) under which the Fed directly bought agency mortgage-backed securities and agency debt to restore market functioning and push down mortgage rates. The operational decisions to purchase agency MBS, set reinvestment strategies and to communicate forward guidance changed both the depth and pricing of the MBS market. Direct Fed participation compressed spreads, increased secondary-market liquidity, and influenced the availability and pricing of mortgage credit to consumers and institutions. The Fed’s balance-sheet reinvestment practices also altered expectations for future MBS demand. The cumulative impact of those actions materially affected housing finance by lowering borrowing costs, enabling widespread refinancing, and supporting home prices — outcomes that altered valuation drivers and liquidity conditions for any financial instrument tied to the housing sector. Market participants, servicers and GSEs adjusted underwriting and hedging behavior in response to Fed purchases and guidance, creating persistent effects on mortgage-backed instruments.