President Trump has a plan to make housing more affordable, and economists think it might accomplish the exact opposite. The proposal involves purchasing $200 billion in mortgage-backed securities using funds from Fannie Mae (FNMA) and Freddie Mac (FMCC), the government-sponsored enterprises that have been in conservatorship since 2008.

Welcome to 'People's QE'

Economist Mohamed El-Erian sees something bigger happening here than just a housing stimulus. By tapping conservatorship powers granted during the 2008 financial crisis, Trump is reviving concerns about political interference in monetary policy that go way beyond jawboning the Federal Reserve about interest rates.

"This should serve as a reminder of two things that markets haven't yet fully internalized," El-Erian said. First, political pressure on the Fed can extend beyond "lowering interest rates" to include "asset purchases," which he compared to "People's QE," the idea of using quantitative easing to fund public spending programs.

Second, growing public anxiety over affordability and the political pressure that follows will trigger increasingly aggressive policy responses, he noted in a post on X.

The Unintended Consequences Problem

Economist Peter Schiff wasn't pulling punches in his assessment. If you're spending $200 billion buying mortgage bonds, that means there's "$200 billion less available to buy Treasuries," he pointed out in a series of posts on X.

Sure, mortgage rates might temporarily drop. But Schiff warned of longer-term consequences, including rising "Treasury yields and inflation." And here's the thing: he argues that high mortgage rates aren't actually the core problem in American housing. High home prices are.

"Trump wants to prevent home prices from falling by using the government to misdirect more credit into the mortgage market," Schiff said. According to his analysis, the policy makes the underlying crisis worse by letting buyers stretch further and "overpay" for homes, artificially inflating prices even more.

This Isn't Your Typical Crisis Intervention

Nick Timiraos, chief economics correspondent at The Wall Street Journal, highlighted what makes this intervention genuinely unusual. When you look back at previous Fed-driven quantitative easing programs during the 2008 Financial Crisis and the COVID-19 pandemic, those happened in response to actual systemic risks threatening the financial system.

"What's notable about this intervention is that it's being done during a period of relatively solid economic activity and with no meaningful stresses in credit markets," Timiraos noted on X. Translation: this is a political move, not an emergency response.

Timiraos also pointed out that when the Federal Reserve purchased mortgage-backed securities in the past, it operated without any "profit motive in mind," which resulted in "large losses on the Covid-era purchases." It's worth asking whether a politically-motivated intervention will fare any better.

The question now is whether temporarily goosing mortgage demand will help Americans afford homes, or simply pump more air into an already overinflated housing market while creating new problems in Treasury markets and inflation down the line.