Though Federal Reserve Chairman Alan Greenspan singled out Ginnie Mae MBS last week as a possible mortgage-related purchasing option for the Fed as the supply of U.S. Treasury securities declines, market observers say that the Chairman exercised political caution by not mentioning the more likely and perhaps inevitable choice for a Treasury alternative - Fannie Mae and Freddie Mac MBS.

For more than a year, the GSEs have been deflecting criticism from Washington politicians - including Rep. Richard Baker (R-La.) and Greenspan himself - that the agencies wield too much power within the mortgage markets and present a level of risk to the economy. Despite this, however, several analysts said that Ginnie Mae bonds may not be adequate for the Fed's purposes in the long-term, and as much as the Chairman does not like to admit it, it may be inevitable that Freddie and Fannie agency debt and MBS is a much more likely candidate for Fed consumption.

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