Category Archives: Federal Reserve

NY Times: Fannie, Freddie Nationalization (aka Conservatorship) Imminent

Guess the powers that be were unwilling to risk playing chicken with the markets and losing. So much for the theory espoused by some that the government couldn’t put the GSEs into custodianship absent a breaching of statutory minimums (technically, by being insolvent under the “fair asset” valuation method, Freddie is already on plenty thin […]

Bill Gross Says Nothing is Going Up, So Treasury Must Intervene

Bill Gross of Pimco’s monthly newsletter, “There’s a Bull Market Somewhere?” is out and making the rounds. The title refers to a Jim Cramer dictum. The bond chief uses it to argue that asset prices are declining on all fronts, which he then contends that the US government must reverse (boldface his): because in a […]

Troubling Signs From Fed’s Jackson Hole Conference

It’s hard to discern what took place in a closed-door session at a remove, but some of the tidbits coming from last weekend’s Federal Reserve conference at Jackson Hole were worrisome. Note I didn’t have this sense about last year’s meetings, based on a reading of Jim Hamilton’s commentary (which may simply mean Hamilton was […]

Fed Staff Economists More Downbeat Than FOMC

Anyone who has ever worked in a large organization knows that the underlings are frequently overruled by the higher-ups. The Federal Reserve is apparently no different. A piece in today’s Financial Times, “Fed minutes bearish on growth,” reports that Fed staffers foresee continuing economic weakness, which in turn made them more sanguine about inflation than […]

Regulators Putting More Banks on a Short Leash

As the Wall Street Journal tells us, the Fed and the Office of the Comptroller of the Currency are issuing more “memorandums of understanding”. The MOUs not only put the bank on notice that its finances or controls aren’t up to snuff, but also call for specific remedies, such as cutting dividends, raising capital, or […]

Buiter Provokes Wrath at Jackson Hole, Says Fed Too Close to Wall Street

Go Willem Buiter! The London School of Economics prof and former Bank of England and European Bank for Reconstruction and Development official has been saying for some time that the Fed suffers from “cognitive regulatory capture” and has been far too responsive to the needs of Wall Street. It’s been puzzling to watch his detailed, […]

If Only Central Bankers Would Hit Bottom

I’m told that alcoholics and addicts have to hit bottom before they are able to renounce their self destructive ways. Ironically, their personal collapse makes them more capable of change than scientists, who, according to Thomas Kuhn in his landmark, The Structure of Scientific Revolutions, were so incapable of abandoning core beliefs that it would […]

More Evidence of Sharp Contraction in Money Supply (Not for the Fainthearted)

We had written in mid July that money supply in the US, as measured by M1 and M2, had been contracting for several month s . Eurozone M1 growth had also fallen to near zero growth levels, and M4, the broadest measure of money in the UK, had actually dipped into negative growth territory. As […]

Stephen Roach: "Pitfalls in a Post Bubble World"

Reader Saboor was kind enough to send me an August 1 report by Stephen Roach, former chief economist of Morgan Stanley, now chairman of its Asian operations. It’s noteworthy in two respects. First, although Roach remains a long-term dollar bear, he made a well timed call that it was oversold, due for a rally, and […]

Inflation Versus Deflation: The Debate Continues

Two very good posts I suggest you read immediately: one by Michael Shedlock, “Implications of the Slowing Global Economy” which at its close makes the case for deflation, and a rebuttal from Steve Waldman, “Why Inflation“. Both are thoughtful, and as much as Waldman has the stronger argument, I suspect he will not be proven […]

Housing Bailout Bill Also Eased Having Fed Rescue Banks

Not only are we getting bailouts, we are now getting Chinese puzzle box bailouts, with new tricks nestled inside other vehicles. Maybe we should quit pretending and just give the American Bankers Association and the National Association of Realtors blank checks from the Treasury Department. We might as well be straightforward about what is happening. […]

Money Market Spreads Signal Continued Stress

Even though the Fannie and Freddie near crisis, which produced a few days of panic in the credit markets, now seems to have abated, money market investors are still on edge. The Financial Times warns that various risk measures remain at elevated levels: Libor, the measure of inter-bank interest rates that is a key barometer […]

On the Larry Summers vs. Willem Buiter Bailout Debate

Charles Wyplosz has a post up at VoxEU that is both clever and informative. He looks at the wisdom of having taxpayers shore up faltering banking systems, using the largely opposed viewpoints of two well-known economists as a point of departure: Larry Summers, former Treasury Secretary, who has argued that intervention is necessary to prevent […]

Your Blogger Says Hello to Paul Volcker

I have occasionally seen Paul Volcker on the street, but never thought the circumstances were right to accost him him. Today I saw him in the neighborhood fruit and vegetable store. I went over and introduced myself, shook his hand told him I was a fan of his and that I remembered the days when […]