Ben Bernanke

While many former homeowners will be spending the holidays in the streets, it is good to know the bailed out banks are making some nice profits… off the American taxpayer. Fed Chairman Bernanke’s continual leveraging of the national credit card via buying mortgage-backed securities to stimulate the mortgage market has done little for the mortgage market and a lot for Wall Street’s bottom line.

From the Wall Street Journal:

The Federal Reserve’s intensified campaign to push mortgage rates lower has hit a wall, in part because a shift in the lending landscape has made some banks unable, or unwilling, to pass along cheaper credit.

While current rates are the lowest in generations, some economists argue that they should be even lower—perhaps 2.8% based on the historical relationship between mortgage rates and yields on mortgage-backed securities. The economists posit that banks are keeping the rates artificially high, boosting profits and depriving the economy of the full benefit of the Federal Reserve’s efforts.

Whether you agree or disagree with the Federal Reserve’s MBS buying program – in what world does Wall Street need further subsidy from the Fed?

Commercial banks reported a record $9.4 billion in income from mortgage-banking during the third quarter of 2012, according to an analysis of data by Inside Mortgage Finance, which says it is the highest since it began tracking such data in 2002. The third-quarter figure was up 18.7% from the second quarter and 72.3% from one year ago, and it was more than what the industry earned in 2007 and 2008 combined.

Will former Goldman Sachs Chief Economist/current Federal Reserve of New York President William Dudley crackdown on these practices? Will Bernanke? Will anyone?

Image by SS&SS under Creative Commons license.