In November 2008, there were significant dislocations in many financial markets, especially in the markets for the U.S. federal housing agencies’ securities. 23 In addition, the housing market was a focal point of the financial crisis. To help support the housing market and improve conditions in financial markets, the FOMC announced an LSAP program on November 25, 2008, that consisted of purchases of agency debt and agency MBS.24 The stated purpose of this program was to “reduce the cost and increase the availability of credit for the purchase of houses, which in turn should support housing markets and foster improved conditions in financial markets more generally. "25 Research suggests that this program reduced “abnormal pricing” in agency MBS— the component of the spread considered to be due to market dysfunction—by about 70 basis points over its first six months.26 In that same time period, the spread of agency MBS repurchase agreements (repos) to Treasury repos fell from more than 200 basis points to near zero. In the framework noted above, this LSAP worked primarily through the market functioning channel. However, research also suggests that borrowing costs were lowered more broadly 27 6 / 10  BIS central bankers' speeches  through a portfolio balance effect.27 Overall, the Desk’s purchases, aided by the lowering of fed funds to the ZLB in December 2008, resulted in lower mortgages rates, which in turn reduced the cost of home purchases and allowed existing borrowers to refinance at more attractive terms.
Their approach to adding policy accommodation with a near-zero overnight policy rate has been to use outright purchases of assets, term lending schemes, and forward guidance on these policy tools.4 The policy of outright purchases of assets is often called quantitative easing (QE) because of the Bank of Japan’s earlier policy focused solely on increasing the size of the central bank’s liabilities.5 While QE is a useful catch-all term for this set of policies, it masks the fact that central banks make different choices in the assets they buy to expand their balance sheets.6 Central bank laws specifying which assets can be purchased and held outright vary, although nearly all central banks can buy and hold the debt issued by their sovereign.7 Indeed, most of the empirical work on the effectiveness of LSAPs is based on the analysis of sovereign debt purchases. More recently, a number of central banks have extended their purchases into the corporate debt and asset-backed securities markets. The Federal Reserve Act does not permit the purchase of privately issued debt such as corporate debt or privately issued ABS.