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Fed Needs to Exit Mortgage Business: Mishkin

The Federal Reserve should get out of the business of owning mortgage backed securities and should have a top priority of selling them, Frederic Mishkin, former Fed governor and a Columbia University professor, told CNBC Wednesday.

"Controlling more than $1 trillion in mortgages is a huge danger to the Federal Reserve," Mishkin said. "The big, big deal going forward is the fact that the Federal Reserve is in a very, very difficult position.”

“It’s very engaged in a private market. In fact, it’s the most politicized of all the financial markets in this country," Mishkin added.

The Fed currently owns some $1.25 trillion in mortgage backed securities.

Mishkin said the Fed did not cause the housing crisis but was forced to seize Fannie Mae and Freddie Mac , the nation’s two largest purchasers of US home loans, when the financial crisis began in the fall of 2008.

“They had to throw things against the wall to see if they stuck to prevent a depression—real bravery here, tough calls —but now you have to clean up the mess,” said Mishkin.

As for the overall economy, Mishkin said the US recovery was on track because of rapid economic growth and low inflation.