The Fed announced a couple days ago that they have set a self imposed goal of buying $500 Billion of mortgage backed securities by mid 2009. I think the announcement was an effort to push mortgage rates down. The actual purchase will likely do the same thing. They are going to start buying these assets in January and $500 Billion seems very aggressive. 

Overall, I think this is a good thing. It will provide a couple benefits. One, it will give banks the ability to put cash back in their coffers which gives them incentive to make new loans. Banks can only make money by lending it.  Also, it gives them a market for these assets with transparency as to the value of these assets. Without a market there is no telling what these assets are worth and this unknown is a problem for the banks.  

The other benefit is for you and me. This effort has already driven mortgage rates down and with the Fed Funds rate (the rate at which banks can borrow money from the government) near zero, all the interest they charge us is profit. This means that with competition, and less fear in the banking industry, mortgage rates should continue to fall. They are very likely to go under 5% and could go to 4%. That will help the consumer put money in his pocket on a monthly basis. 

Good Trading
Steve Peasley