Category Archives: Federal Reserve

Term Auction Facility: Confirmation of Financial Stress?

Readers may recall that a week or two ago, there was a good deal of chatter in the ether about reports issued by the Federal Reserve that showed that the banking system, for the first time ever recorded, showed negative net non borrowed reserves. Some commentators and analysts were alarmed; others regarded it as no […]

Tim Duy: Fed Would Like to Stop Cutting, But Lacks Nerve

Fedwatcher Tim Duy (posting on Mark Thoma’s Economist’s View) read Bernanke’s recent Congressional testimony as saying that further rate cuts really weren’t warranted give the Fed’s medium term forecast. However, Duy has muffed some calls before by assuming that the Fed would stick by its official pronouncements rather than be swayed by the baying of […]

Grading Central Bank Performance in the Credit Crisis

The Financial Times has an interesting piece today by Chris Giles and Gillian Tett, “Lessons of the credit crunch.” The world’s top central bankers have learned that their traditional policy tools haven’t worked as well as they would have liked. So how to judge the job they have done? The FT story fails to address […]

UBS Raises Concern About Negative Non-Borrowed Bank Reserves

In an earlier post, we had taken a worried look at the fact that banks’ net non-borrowed reserves went negative in January. We were only somewhat concerned because this unprecedented pattern was clearly the result of the Fed’s implementation of its TAF, the Term Auction Facility, which gives banks funding if they post collateral (and […]

Increasing Inflation and Recession Pressures Weigh on the Fed

While the markets anticipate more aggressive cuts in target Fed funds rates soon, the central bank’s task is complicated considerably by rising inflationary pressures. A Wall Street Journal story says that remarks Fed officials show worry that monetary policy may become too expansive: Federal Reserve officials are acknowledging increasing weakness in the economy, signaling a […]

Nouriel Roubini’s Doomsday Scenario

In today’s post, “The Rising Risk of a Systemic Financial Meltdown: The Twelve Steps to Financial Disaster,” the bearish and prescient professor Nouriel Roubini sets forth how a systemic financial crisis could play out. The most troubling thing about this piece is that it is quite plausible. Of Roubini’s twelve steps, the first eight are […]

"Bernanke Makes Bulls From Dollar Bears"

Long term, the dollar is not a good bet unless the US increases its savings rate and reduces its current account deficit considerably. Monetary easing and fiscal stimulus only exacerbate the problem. But never forget the Wall Street saying, “Don’t fight the tape.” From Bloomberg: Ben S. Bernanke’s decision to lower interest rates 1.25 percentage […]

Stiglitz: On the Fallen Standing of the US High Finance

This article from Project Syndicate (hat tip Mark Thoma) is a report from Davos by Nobel Prize winner Joesph Stiglitz on the considerable skepticism abroad toward US financial and business practice, particularly our faith in deregulation. It is a telling indicator of how rapidly the world is changing, yet many in the US are still […]

"Stop behaving as whiner of first resort"

A comment by Ricardo Hausmann in today’s Financial Times takes US policymakers to task for trying to prop up demand and stave off a recession. We’ve pointed out repeatedly, as have various economists quoted here, that consumption as a percentage of US GDP is unsustainably high and saving correspondingly too low. It can only continue […]

Central Bankers: Securitization is Dead, Long Live Banking

John Dizard, in “Prepare for return of a direct lending world,” argues that central bankers believe that securitization is not coming back in any meaningful way in the foreseeable future, and banks will therefore have to roll up their sleeves and do old-fashioned lending in much greater volumes than before. That may seem like a […]

Non-Borrowed Bank Reserves Now Negative (Updated)

Reader Carl about ten days ago had sent me a link to a Federal Reserve data series “Aggregate Reserves of Depositary Institutions Adjusted for Reserve Requirements.” The series goes back to 1975. What caught Carl’s attention was that the “”non-borrowed reserves” column, under the “not seasonally adjusted” heading, to the right, shows negative values for […]

Bond Insurer Update: Surprisingly Positive Noises from the FT; Egan Jones Conference Call

Despite the seeming absence of news on the bond insurer rescue front (the only development reported was the selection of the boutique M&A advisory firm Perella Weinberg to assist the State of New York in its efforts to put a deal together), the Financial Times has four articles on it today, from the neutral to […]

Fed Approaches Negative Real Interest Rate Territory

While the question of whether the Fed will lower interest rates again after its emergency cut last week is still up in the air, it is pretty clear that further cuts in the Fed’s target rates are in the offing. And the markets believe the Fed will continue to cut quickly, putting the odds of […]

IMF, Larry Summers: The Wile E. Coyote Moment Has Arrived

There has been a fair bit of discussion of the so-called Minsky Moment, when an economy that has build a house of cards of speculation and over-leveraged “Ponzi units” (creditor that could never make good on their commitments, and are viable only by finding new suckers to give them new debt to pay old lenders) […]

"Welfare for Wall Street, Federal Reserve-Style"

Thomas Palley posts only occasionally, but just about everything he writes is first rate, and today’s offering is no exception. Palley argues one of our favorite views, that the Federal Reserve interest rate cuts have had more to do with trying to prop up asset values than with stimulating growth. He points out that this […]