Federal Reserve vice chair Janet Yellen’s move closer to the Fed chair puts her in position to lead
“The first and foremost will be the future of the Fed's quantitative easing, and that will be driven largely by how Yellen interprets upcoming economic data,” says Andrew Olmem, a partner at Venable LLP, and a former chief counsel at the Senate Banking Committee.
“The second impact her nomination will have will be on the ongoing Dodd-Frank rulemakings, which can have a substantial impact on the willingness of institutions to hold mortgages and originate them,” he says, commenting on the Senate Banking Committee’s approval of
“For example, the Fed’s proposed liquidity rules right now strongly favor institutions holding more Treasuries as opposed to mortgage-backed securities,” he says, referring to the proposed liquidity coverage ratio rules designed to ensure the soundness of depository cash flows during a 30-day period.
“There’s a tiered approach for what types of assets satisfy that requirement,” Olmem says. Treasuries can be used, and other assets are allowed “but there are limits” to the use of other assets like MBS,” he notes. These limits could affect what banks can hold and thus demand for mortgage-backed securities in general.
