Central banks on both sides of the Atlantic are in talks about feasibility of mass purchases of mortgage-backed securities in a bid to solve the global credit crisis, the Financial Times said on Saturday.
The newspaper, without citing sources, said talks were at an early stage and part of a broader exchange on how to battle the turmoil in financial markets, which has continued despite injection by central banks of billions of dollars of liquidity and cuts in interest rates. The Federal Reserve is exploring the use of public money to shore up the market in a key financial instrument, the FTsaid, adding while European Central Bank is less keen.
Central banks have so far been prepared to lend against mortgage-backed securities rather than buying them outright.
The securities have plunged in value amid a credit squeeze which was sparked by low quality mortgages in the US.
Meanwhile, the Bank of England said it is studying ways to “ease the strains” in financial markets while denying a report that it’s considering using public funds to shore up the mortgage-backed securities market. “We can confirm that we have been examining a number of other options, but it is too early to go into any detail,” he said