Gensler Presages Renewed Push-Out Battle Over Bank Securities Regulation
In his testimony ahead of his first Senate Banking appearance as SEC chairman, Gary Gensler added several new market-structure integrity and transparency issues to the Commission’s already-formidable to-do list, announcing a review of the non-Treasury fixed-income market.
Fed Stock Trading Emboldens Central Bank Critics, Report Says
News last week that leaders of the Dallas and Boston Federal Reserve banks were actively trading stocks and other investments while setting monetary policy continues to reverberate. “Once it might have been acceptable for Fed officials to own lots of stocks and bonds as long as none was issued by the banks that directly executed monetary policy and were also regulated by the central banks”. Karen Petrou of Federal Financial Analytics wrote in a report to clients. “Now of course none of this makes sense,” Ms. Petrou believes the situation as well as other factors, calls into question why quasi private regional…..
Are Federal Reserve Banks Forever?
After my latest opinion piece appeared in Barron’s on Thursday, I was stunned by the virulence with which Barron’s readers — not exactly a bunch of Democratic Socialists — agreed with me not because of my reasoning, but because they believe the Fed in general and Jay Powell in particular are engaged in a sweeping conspiracy on behalf of the wealthiest global capitalists. The new controversy over Reserve Bank president stock holdings only adds fuel to this fire. Are Federal Reserve Banks forever? Their history suggests maybe not.
After my latest opinion piece appeared in Barron’s on Thursday, I was stunned by the virulence with which Barron’s readers — not exactly a bunch of Democratic Socialists — agreed with me not because of my reasoning, but because they believe the Fed in general and Jay Powell in particular are engaged in a sweeping conspiracy on behalf of the wealthiest global capitalists. The new controversy over Reserve Bank president stock holdings only adds fuel to this fire. Are Federal Reserve Banks forever? Their history suggests maybe not.
Reserve Banks are creatures of 1913, created in concert with the Federal Reserve Board in Washington as part of the awkward compromise that persuaded those who feared a dominant federal banking powerhouse that the central bank would have roots outside the largest cities and thus be beyond the reach of New York’s powerful bankers.
This balancing act is in fact one reason the Board is headquartered in Washington, not New York, and also why the New York Fed is the most powerful among nominal equals when it comes to its fellow Reserve Banks. The fundamental anachronism of the System is evident in its geographic footprint — a heavy concentration of Reserve banks up to Kansas City and St. Louis and then not a single Reserve Bank for all of the mountain and western states but the lone edifice still standing apart in San Francisco.
The ethics rules now at issue due to recent revelations are also artifacts of not just the Reserve …
Fundamental Questions About the Future of Housing Finance
In the late 1980s, Freddie Mac challenged fundamental assumptions about its public mission when it purchased tobacco stock to enrich its portfolio and, shortly thereafter, briefly obtained a statutory change eliminating the private mortgage insurance industry. Combined with Fannie Mae’s increasing flights into high finance, this persuaded Congress in 1992 to create the Office of Federal Housing Enterprise Oversight, which at least pretended to regulate the GSEs, and to mandate an affordable-housing mission, which pretended to force Fannie and Freddie back to the public purpose on which their privileges rested. Despite sweeping safety-and-soundness reforms in 2008, there matters largely rested until Sandra Thompson took over the Federal Housing Finance Agency this June
BIS Study: Fed is Also Promiser of First Resort
A new BIS paper finds via analysis of the Fed’s Secondary-Market Corporate Credit Facility (SMCCF) that the Fed’s corporate credit backstops functioned more by dint of the Fed’s promise to safeguard the market than by actual loan purchases or other actions to do so.
Safe as Houses?
Soaring house prices have of course aroused lofty housing-bubble worries. Two new analyses from the Federal Reserve Bank of New York aim at reassurance but nonetheless offer some new, cautionary comparisons to the last time a housing bubble burst.
Gensler Highlights Fair Pricing in Anti-Gamification Push
After issuing a digital-engagement practices RFI late last month, SEC Chairman Gensler today expanded his concerns to include ensuring fair pricing and eliminating what he called historical biases as he pursues an array of anti-gamification reforms.
HFSC Prepares Housing Infrastructure Push
HFSC majority staff today released the staff memo detailing the $327 billion package to be marked up on September 13 as part of the omnibus reconciliation bill. As anticipated, the package is almost exclusively housing focused, reflecting Chairwoman Waters’ (D-CA) belief that she has a commitment from the Biden Administration to address housing infrastructure in the overall spending packages.
FSOC Considers Risks It Dare Not Name
Although Members of Congress have long called for greater FSOC transparency, the Financial Stability Council again met today in a closed session.
The Fed Is Deep in Uncharted Waters. Danger Ahead
By Karen Petrou
Although Jay Powell delivered his all-important annual address atop a virtual Wyoming mountain, the Federal Reserve is nonetheless mired in the Big Muddy. This mythical river was described in a high-impact Pete Seeger song mobilizing Vietnam War opposition. In it, soldiers led by politicians start out in a small, clear stream, wade on and, as the waters rise and the mud deepens, keep going because they don’t and then can’t turn around. All they do is march on to a surely-grim fate. So too with U.S. monetary policy: It’s past time to turn around but still critical that the Fed quickly do so. Fed policy has three key components, none of which have worked as planned. The post-2010 recovery was the weakest since the Second World War; inflation constantly surprises the central bank; and markets keep rising to troubling and sometimes disastrous heights even as U.S. economic inequality gets steadily more acute.
https://www.barrons.com/articles/fed-economic-policy-powell-inflation-51631120497…
IOSCO Stands By SOFR-Based Benchmarks
Echoing recent U.S. official comments, IOSCO today formally stated concerns that some credit-sensitive LIBOR alternative benchmarks pose problems akin to those that forced LIBOR abandonment.
Frustrated Basel Head Blasts Banks
Heightening criticism of Basel III’s slow implementation, Outgoing Basel Committee Secretary General Carolyn Rogers today took sharp aim at banks which she held responsible at both the national and international level.
OCC Sounds Official Death Toll for Trump CRA Reg
As Karen Petrou’s Monday memo forecast, FHFA is doubling down on an already-ambitious work plan to make Fannie and Freddie the epitome of mortgage-finance equity.