Fed's Tarullo backs more MBS purchases (by Greg Robb)

WASHINGTON (MarketWatch) -- Federal Reserve Board Gov. Daniel Tarullo on Thursday backed another large-scale purchase program of agency-backed, mortgage-backed securities to support the economy. In a speech at Columbia University in New York, Tarullo said that the purchases could help the housing market, which is "central to the slow pace of the recovery." The Fed has already purchased $1.25 trillion of agency MBS in 2008 and 2009 as part of its $2.3 trillion of asset purchases, or quantitative easing. Tarullo said that a proposal to allow underwater homeowners to refinance their mortgages would increase the effect of an MBS purchase plan. In an interview with The Wall Street Journal published Thursday, Boston Federal Reserve Bank President Eric Rosengren also said the Fed should consider more MBS. Tarullo added that he disagreed with some Fed officials who believe the central bank has done all it can to help the economy. "If we take account of the unusual nature of the current shortfall in fashioning policy responses, there is much that government policy -- including monetary policy -- can still do," he said.