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On 1, nope not really, and besides it would be supportive of the banks and investment firms for their debts to trade at higher prices rather than lower ones. And the Fed has an explicit mandate to be supportive of them when market turmoil requires it. It is also clearly envisioned by its charter that it would buy the debts of banks and other financial firms. Indeed for a long time banker's acceptances (short term bank bills, mostly used to finance trade) were the main security the Fed traded in for open market operations. They didn't switch to mostly treasuries until the great depression, and bankers acceptances still made up half the portfolio.

The conditions that need to apply are that the company whose debt is purchased has to be profitable or viable long term, and thus a sound credit, if it can borrow at normal undistressed rates - that is one. And two, the market must have a high demand for dollars and an aversion to risk at the time. You could not possibly do this sort of thing in 1980 with T-bills at 14% and upward, and inflation in double digits. They can get away with it now because the threat is deflation, and T-bills are at zero, and everyone is scrambling to get *into* cash, not out of it. This means the extra dollars they create when they buy securities net, will not be repudiated by the public, and so won't simply stoke price increases and interest rates.

So, there is a company specific requirement of soundness if it can get financing at reasonable rates. For instance, GM or Ford today would not obviously meet such requirements, because they were losing billions even at normal interest rates. Nor would airlines regularly going in and out of bankruptcy, due to competition and overcapacity. And then there is a market cycle or timing or monetary policy situation requirement, that the threat be deflation not inflation, and the rates on new dollars issued very low rather than very high. Call it a micro and a macro economic requirement. Both are met right now.

On 3, yes Bernanke definitely has the stones to consider something like this. He cut his teeth studying Fed misteps in the great depression. He is sometimes ridiculed as "helicopter Ben" for the idea that deflation can be prevented by just creating money aggressively enough - dropping it out of helicopters. In fact he was quoting none other than arch-monetarist Milton Friedman on that point. Even Friedman agrees the Fed screwed up in the 1930s by being so insanely tight, at the wrong time.

But yeah, if he thinks the alternative is a deflationary collapse of banks, money supply, and dragged by them, demand, Bernanke is exactly the kind of guy who would do something like this. He has already shown himself far more willing to use new and unorthodox means to address this crisis, and precisely to use more targeted interventions, instead of the blunderbuss of just leaving rates near zero forever and waiting for the market to come around.

On the where and amount of losses, the answer is mixed. Most *foreclosures* are to quite marginal buyers of quite low priced structures, often very old ones, that no one else wants when the previous owner defaults. There are large numbers of foreclosures in Detroit, distressed areas of Cleveland and the rest of the industrial midwest, and some in the rural south, that are of this character. There are also large losses and many foreclosures in the cheaper inland areas of the California valley, where prices are a fraction of what they are in the rest of CA, but high by the standards of the lower end of markets elsewhere. What I mean is you can have poor working families, including many recent immigrants, in run down places with $250,000 price tags, in that area. And foreclosures there have certainly been high.

But the largest mortgage *losses* have happened in coastal Califonia and Florida, as both overpriced and overbuilt, and in inland boom towns of the past decade like Las Vegas and Phoenix, where prices moved up from quite low levels, well below Northeast levels e.g, but could not sustain those levels because new houses on cheap desert land could be produced rapidly to meet any demand. You got houses outside both that went for $325000 at the top that can't ind buyers at half that today - with others farther away from the city centers built late and not filled, sitting empty with price tags $25,000 lower.

In Florida is was especially condos, a large portion of them speculative investment properties or second vacation homes. In California the prices just got insane. Some of that in the northeast as well. People squeezed into more house than they could afford. Only in the NE and CA are the over $417s the bulk of the middle class market, though. All the other places readily fit below the Fannie or FHA limits.

Fewer of the pricey coast stuff is going into outright foreclosure, but there are late payers, lots of cases of large price declines or negative equity. The biggest culprit on those places were ARMs used to squeeze into more house, which goosed the prices, and cash out refinancings that levered higher and higher as the prices zoomed. Buyers and refinacers from 2006 or 2007 are defaulting in large numbers, while those who did so earlier had enough equity they mostly haven't. Some still might, though, as the economy weakens. (Job loss foreclosures or forced sales, rather than price drop induced ones, I mean).

Fine questions all. I hope the responses help.