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Federal Reserve Bank of Atlanta
FRB Atlanta Working Paper
Unconventional Monetary Policy and Risk-Taking: Evidence from Agency Mortgage REITs
W. Scott Frame
Eva Steiner

We study how the Federal Reserve's quantitative easing (QE) influenced the behavior of Agency mortgage real estate investment trusts (REITs)—a set of institutions identified by the Financial Stability Oversight Council as posing systemic risk. We document that Agency mortgage REITs: [i] equity prices reacted to QE announcements and in a manner consistent with their business prospects; [ii] grew markedly during QE2 and receded during QE3 in relation to the Federal Reserve's Agency MBS purchase activity; and [iii] increased their leverage during QE3. Our findings are consistent with unconventional monetary policy actions crowding out private investment and "reaching for yield" behavior by financial institutions.

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W. Scott Frame & Eva Steiner, Unconventional Monetary Policy and Risk-Taking: Evidence from Agency Mortgage REITs, Federal Reserve Bank of Atlanta, FRB Atlanta Working Paper 2018-8, 01 Aug 2018.
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Keywords: quantitative easing; risk-taking; REITs; GSEs; mortgages; securitization
DOI: 10.29338/wp2018-08
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