Federal Reserve press conference, 2013-06-19 — Chair Ben Bernanke

Question (Peter Barnes, Fox Business): Peter Barnes, Fox Business. Sir, one of the highlights of the Kansas City Fed conference in Jackson Hole every year are remarks by the Chairman, you. You’re not going this year. We’ve heard it’s because you have a conflict in your personal schedule. But some have read—taken that as a sign that you may not be staying on the job for another term. Could you comment on that? And could you offer us—give us a little more explanation as to why you’re not going to be in Jackson Hole for the first time?
Answer: Well, as I’ve said, I’m not going to comment on my personal plans, but I will say this. I think there’s a perception that the Jackson Hole conference is a Federal Reserve Systemwide conference. It’s not. It’s a conference sponsored by one of the 12 Reserve Banks. Every one of the 12 Reserve Banks has conferences, has meetings, and this is the one I’ve gone to the most of probably any of the Reserve Banks, so I think it’s not inappropriate to go to different conferences, different meetings, and to essentially meet all the constituents that I have in these different Reserve Banks. So that’s one reason, certainly.

Question (Scott Spoerry, CNN): Thank you, Sir. Scott Spoerry from CNN, CNNMoney. Well, first of all, I should tell you that your analogy to landing the economy on an aircraft carrier worried me a little bit because, from personal experience, I find that it’s always a little bit jarring to land on an aircraft carrier. But I wanted to talk about mortgage-backed securities. You mentioned during your comments here that, if I understood correctly, that you’re not going to dispose of the mortgage-backed securities that you have on the book during this period of normalization. And I’ve heard many people on Wall Street and elsewhere say that right now the Federal Reserve is the market for mortgage-backed securities, and so—which means that it’s kind of a warped market right now. And I’m just wondering, how focused are you on mortgage-backed securities and this larger world market, which—what used to be a world market for mortgage-backed securities. And I guess—I guess what I’m saying, has the ground shifted from under us in terms of the mortgage-backed security world on a permanent basis, or at least for a very long-term basis, because of the devastating nature of what happened a few years ago?
Answer: Well, we are still only a fraction of the total holdings of mortgage-backed securities, but, more relevant, as part of our assessment—of our ongoing assessment of the potential costs of our various asset purchase programs, we pay very close attention to market functioning. And our assessment is that the MBS market is still quite a healthy market in terms of the spreads, in terms of execution times, in terms of the number of people on both sides of the market. You know, there are REITs now that are building up their MBS portfolios. There are plenty of real-money investors holding MBS. So, you know, if the market was really breaking down in some way that would be a factor we’d have to take into account. But our assessment—and, of course, we’re in that market quite a bit, so we have a lot of information about it—our assessment is that that market is still working quite well, and that our purchases are not disrupting the normal price discovery and liquidity functions of that market. I think that the events of five years ago, obviously, do have a big long-term effect. There are bills in Congress that would change, reform the GSEs, for example, and ultimately would change the market for mortgage-backed securities, perhaps increasing the amount of private placements or changing the whole institutional structure of that market. So, we may end up holding some securities, which are in some sense left over from a previous era at some point. But nevertheless, you know, for the time being, they are the mortgage-backed securities market— Fannie and Freddie are basically it—and we are, of course, legally allowed to buy and own those securities. And so, we have found it useful to do that, and we believe it’s contributed to lower mortgage rates and a stronger housing market. So that’s been our rationale. And just, again, to come back to your question, we do not see any significant deterioration in market functioning. If there are things that you can point us to, we would be obviously very interested.