Category Archives: Federal Reserve

Credit Market Warnings Escalate: Barclays, Fleckenstein Sound Alarms

Alert readers pointed us to new sightings of heightened credit market worries from Barclays via the Telegraph and Bill Fleckenstein via Calculated Risk. What distinguishes them from normal patter about the debt markets is the urgency of their alarms (hat tip Dwight and doc) The irony here is that the Fed, as Tim Duy points […]

The End of Exceptionalism? IMF to Examine US Financial System

Der Spiegel, in “The Shrinking Influence of the US Federal Reserve,” (hat tip reader Saboor) discusses how the US is submitting to a detailed, comprehensive investigation of it financial system under the Financial Sector Assessment Program. While Der Spiegel claims that this program is a humiliation to the US, the real significance may be that […]

Fed Considering Relaxing Rules on Private Equity Investment in Banks

We’ve mentioned from time to time the Fed’s fantasy that banks could recapitalize in short order. John Dizard of the Financial Times has been the most blunt in describing the disconnect between the central bank’s wishes and reality: It is not fair to say the Fed does not have a plan. It does. The plan […]

Did FOMC Transparency Lead to Overly Low Interest Rates?

Remarkably, a post at VoxEU, “The dangers of increased transparency in monetary policymaking,” by Ellen Meade and David Stasavage suggest in that one of the effects of the Fed’s change in 1993 to publish the minutes of FOMC meetings was less candid discussion (no surprise) which led to greater Greenspan influence over interest rate policy, […]

"Central banks’ function to maintain financial stability: An uncompleted task"

This VoxEU article by Charles Goodhart examines the tensions between central banks’ responsibilities, namely price stability and financial stability. Not only does this piece do a nice job of distilling the issues but it also works through one of the pet remedies being bandied about, namely, implementing counter-cyclical regulatory measures, such as increasing capital requirements […]

Economists Versus Traders on 2008 Fed Rate Increases

Although a Bloomberg article, “Bernanke Plays `Dangerous Game’ Balancing Rate Talk With Action,” focused on the Fed’s rate dilemma, it also in passing revealed a sharp difference of opinion on the central bank’s likely actions later this year between economists and market participants: While Bernanke’s warning that the Fed will “strongly resist” a jump in […]

IMF: US Economy Stagnant, Recommends Hold on Rates

The cold water Yankee crowd is not going to like the latest word from the IMF, which sees the US economy at close to a stall level on growth for the next six months. It believes that diminished demand will alleviate inflationary pressures and endorsed the idea of standing pat on interest rates for now. […]

Paulson Pushing Harder for Fed As Financial Stability Regulator

I really wish the Bush administration was over, now. Here we have the Treasury secretary calling for the nation’s central bank, which already has internal tensions in its charter (preserving the soundness of the banking system, keeping inflation low and stable, and maintaining full employment) to also be in charge of financial stability: Mr. Paulson […]

Has the Fed Compromised Its Independence? (And Otherwise Messed Up?)

Today in the Financial Times, John Plender has an apple pie and motherhood column on the importance of central bank independence, It’s a tad ironic, since he fails to recognize that it’s an illusion in the US. But Plender isn’t to be faulted. An entire generation has grown up in the Greenspan/Bernanke era, and thus […]

How Dangerous Are OTC Markets?

This week’s Institutional Risk Analytics has an alarming title: “Is Risk Management Even Possible in an OTC Marketplace?” By all indications, the article points to a strong “no”. As much as I am a harsh critic of so-called financial innovation, the headline goes further than the case the article makes. OTC markets covers a large […]

RBS Publishes Global Stock and Bond Crash Alert

Ah, just when you thought it might be safe to venture into the markets again, RBS sends out a red alert, warning private clients to prepare themselves for a full fledged rout in equities and bond markets in the next three months, with the S&P losing 300 points, or nearly a quarter of its value, […]

Mohamed El-Erian’s Odd Piece on Global Imbalances

Full disclosure: I’m normally a fan of Mohamed El-Erian, former head of Harvard Management, now co-president of bond giant Pimco. But his current comment in the Financial Times, “How best to manage global imbalances,” struck me as more than a tad disingenuous. Let’s go through the article: Whatever happened to the debate on global payments […]

Fed Rate Increase Looking Less Likely

How little resolve our central bank has. We said we thought Fed was unlikely to raise rates, or if it did, it would be at most 25 basis points between now and year end., which falls in the category of being cosmetic. The central bank has been particularly, one might say unduly, attentive to the […]

AIG’s Connolly: "Crisis of Capitalism is Upon Us"

It’s one thing to read an apocalyptic alarm from, say, a blogger or a newsletter writer. It’s quite another to see it coming from an analyst at a large institution, in this case AIG. Bernard Connolly is deeply critical of central banks, not just of their recent actions but also of their very existence, and […]

ECB: "Litterbin of the Last Resort"

We’ve read from time to time that European banks have been launching deals, and not particularly good ones at that, solely for the purpose of using those securities as collateral for loans from the ECB. However, we hadn’t seen a longer-form treatment of that phenomenon. The Economist has decided to step into the breach. The […]