Category Archives: Federal Reserve

Covert Nationalization of the Banking System

One of the upsides of blogging is sometimes other inquiring minds get to the bottom of matters that have been nagging at you. We had warned a couple of months ago that a colleague with serious connections into the Treasury and Fed told us they were working on plans for a quasi-nationalization of the banking […]

Hamilton: Negative Real Interest Rates Feeding Commodities Bubble

Jim Hamilton must feel like a Cassandra. At the Fed’s Jackson Hole conference last August, Hamilton gave a presentation that warned that the pricing of Fannie’s and Freddie’s debt was unwarranted given their highly leveraged balance sheets unless you believed that they really were full faith and credit obligations. He warned that assumption would be […]

Fed Fund Rate Predictions

Courtesy the Cleveland Fed. Note that this is as of time, the Fed fund futures market says there is zero probability of a 25 basis point reduction. A 50 basis point cut has 50% odds. Note this chart is dated March 6. and therefore does not reflect the impact of the announcement of the increase […]

Fed Increases the Term Auction Facility

The Fed raises the amount on offer for the TAF from $30 billion to $50 billion, bringing the size of the facility to $100 billion. The stock market took cheer briefly, but as of this writing, the Dow has retreated back into negative territory. From Bloomberg: The Federal Reserve plans to increase its loans to […]

Fisher: Don’t Expect the Fed to Bail You Out

Let’s see if the credit markets take this warning seriously. From Bloomberg: Federal Reserve Bank of Dallas President Richard W. Fisher said investors shouldn’t assume the Fed will keep up the recent pace of interest-rate cuts. “We reacted with very deliberate actions” in January, said Fisher in an interview with Bloomberg Television in Paris. “That […]

The Fed: A Pollyanna on Inflation

I’m late to this item, but from what I can tell, it went relatively unnoticed upon despite its seeming importance. The Wall Street Journal’s Greg Ip, in “Fed Officials Downplay TIPS Inflation Signal,” makes the case that the Fed is whistling in the dark as far as inflation is concerned. He takes their optimism at […]

Martin Wolf Worries About Rising Commodity Prices

Martin Wolf of the Financial Tmes focuses on the question of whether we are repeating the mistakes made in the 1970s, of entering a period of inflation due to overly accommodative monetary policy. Although he hesitates to reach a firm conclusion, he sees more evidence that commodities price rises are a function more of fundamental […]

The Bernanke Tightrope Fantasy

Jim Hamilton, in his latest post at Econbrowser, uses as a point of departure the oft-invoked image that Bernanke is walking a tightrope between inflation and recession. Because Hamilton is a Serious Economist, he has to be measured and fact based, which sometimes means he can’t be as pointed as I suspect he might like […]

"Chairman Greenspan’s Legacy"

Harvard Professor of Political Economy has penned a prototypic New York Review of Books essay on Alan Greenspan’s The Age of Turbulence. That means no snarkiness. What would likely disappoint readers of this blog is that Friedman thinks that Greenspan acquitted himself well in managing monetary policy; he argues that growth was weak after 2001 […]

"Turmoil reveals the inadequacy of Basel II"

This comment in the Financial Times by Harald Benink and George Kaufman, discusses a major shortcoming in Basel II, the new bank capital standards promulgated by the Bank of International Settlements, namely, that banks can use their own risk models to set minimum capital levels. That procedure allows them to tell the regulators how much […]

Paulson Says No Go on Housing Bailouts

Treasury Secretary Hank Paulson has thrown a bucket of cold water on a number of proposals being floated in Washington to rescue troubled borrowers via the explicit use of public funds, such as the idea of reviving the 1933 Home Owner’s Loan Corporation to buy underwater mortgages and renegotiate them. In some respects, Paulson’s tough […]

The Fed Says Its Collateral is Fine, Thank You Very Much

There has been a fair bit of discussion on the Web about the Fed’s Term Auction Facility, including some concern that the TAF was enabling banks to post lower-quality collateral than they might otherwise (we had observed previously that the collateral permitted and the haircuts applied are the same as for the discount window). Surprisingly, […]

Rising Worries About Fannie Mae Creditworthiness?

The markets seem to think so…..From Doug Noland at Prudent Bear: Now Fannie is in theory a good credit, but its implicit Federal guarantee has never been tested. Market observers may be worried that many of the “rescue the homeowner” proposals, starting with what Tanta calls “Loans Formerly Known as Jumbos” now eligible for the […]

The Fed’s Self-Delusion (Inflation Edition)

Individuals and institutions are capable of considerable self-deception when faced with difficult choices. The Fed’s latest signals about what it intends to do about inflation are a classic example. Both Bloomberg and the Financial Times tell us that the central bank stands ready to raise rates quickly to ward off inflation. From Bloomberg: Federal Reserve […]