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PROS:

1. The US & world economy would stabilize

2. Improved Liquidity

3. Improved Investor Confidence

4. Reduced impact of the financial crisis on the US Economy and GDP.

CONS:

This plan can be described as a risky investment, as opposed to an expense. The MBS within the scope of the purchase program have rights to the cash flows from the underlying mortgages. As such, the initial outflow of government funds to purchase the MBS would be offset by ongoing cash inflows represented by the monthly mortgage payments. Further, the government eventually may be able to sell the assets, though whether at a gain or loss will be known only in future.

* MBS - Mortgage Backed Securities

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16y ago

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