Mortgage-backed securities took the US economy to the brink of total collapse when US bank over stuffed themselves with these assets. Attracted by the siren song of high yields and illusions that real estate always appreciate and homeowners never default in huge numbers, they learned the folly of their assumptions.

Is the US Federal Reserve headed down the same road? Recently released Fed data shows that their balance sheet has grown to $2.324 trillion, mostly fueled by increased ownership of mortgage-backed securities (MBS) guaranteed by Fannie Mae, Freddie Mac, and Ginnie Mae. The central bank is now holding $1.129 trillion of these housing agencies’ MBS assets.

The Fed had committed to buy up to $1.25 trillion in MBS and $175 million in Fannie Mae, Freddie Mac, and Federal Home Loan Bank bonds as a part of their rescue of the collapsing mortgage and housing markets. This commitment was scheduled to cease in March 2010, but the Federal Reserve appears to continue to take delivery on these securities.

The US government balance sheet is still highly weighted in supporting a limping recovery from the worst US recession in 70 years. In addition to the bloated mortgage-backed securities and housing related assets on the Fed’s balance sheet, emergency lending to Banks continues to grow. The Fed reports that overnight direct loans to banks, via the discount window averaged $86 million in the current week–up from $41 million in the previous week.

Any silver linings in the financial markets and economic trends are tempered by questions of how much in stability is wholly the result of enormous US government balance sheet support.

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