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Opinions and views from expert CFOZone members.

Tag >> Fed
Aug 19
2010

A better way to boost demand

Posted by Ron F in Riskrecoveryrecessionfinancial market reformfinancial crisisFederal ReserveFedeconomycareer advancementbubblesBanksbank lending

Ron F

Bear with me here. This is going to be one of those "out there" posts. But Steve Randy Waldman takes an interesting stab at a problem I've been wrestling with, at least in the furthest reaches of the financial corner of my brain, since the financial crisis began.

And that is how to stimulate the economy without creating another asset bubble. It sounds easy enough to the Keynesians, but as Waldman has pointed out before, rebooting aggregate demand through traditional government action may simply create another bubble. And ultimately, the distinction between monetary and fiscal policy may be moot.

Aug 18
2010

Why regulators shouldn't listen to economists

Posted by Ron F in RiskRegulationNew York Fedfinancial crisisFederal ReserveFedcomplianceBanksbanking reformBankingbank failures

Ron F

This brouhaha over the Boston Fed's rationalization for missing the housing bubble reminds me of a conversation I overheard a few weeks ago between a former Federal Reserve bank supervisor and his counterpart at the New York Fed.

I can't give you their names since they were conversing privately a few feet away from me before the start of a conference on financial regulation (nor can I give you the name of the confab since that would give their identities away), and I just managed to overhear the exchange.

Aug 18
2010

Keynes' biographer skewers deficit hawks

Posted by Ron F in recoveryrecessionObama Administrationgovernment financeglobal economyFederal ReserveFedeconomyECBdemanddefaultcareer/management

Ron F

This piece published today by Project Syndicate is as insightful a critique as I've seen of the consensus that has emerged among policymakers that government deficits must be cut to restore economic growth.

Not that we haven't taken a stab at that ourselves.

Jun 14
2010

How bad a hit to GDP from financial reform?

Posted by Ron F in SifmaRiskRegulationrecoveryrecessionMorgan StanleyloansJ.P. Morgan Chasefinancial reformfinancial crisisFederal ReserveFedeconomyCongresscomplianceBanksbanking reformBankingbank lendingbank failures

Ron F

A panel sponsored by the Securities Industry and Financial Markets Association on Monday on what banks can expect from financial reform warned that higher capital reserves and other limits Congress imposes on their profitability would hurt the economy as they curbed their ability to lend.

Several panelists, including Adam Gilbert, head of regulatory policy in the corporate risk management group of JP Morgan Chase, and Gary Mandelblatt, chief risk officer of Nomura, warned repeatedly of such "unintended consequences" from financial reform.

Jun 09
2010

The Fed once again proves to be a regulatory pushover

Posted by Ron F in Timothy GeithnerRegulationObama Administrationfinancial market reformfinancial crisisFederal ReserveFederal Deposit Insurance Corp.FedEnroncomplianceBanksbanking reformbanking industryBanking

Ron F

Anyone who thinks the Federal Reserve ought to oversee systemic risk ought to take a close look at this article.

By now, of course, it's no surprise that banks used yet another financing gimmick to make their capital look stronger than it really was. This one, involving Trust Preferred Securities known as TruPS, is doubly gimmicky, in so far as it involves both hybrid securities (i.e., a have your cake and eat it combination of debt and equity) and off-balance-sheet treatment. In terms of magnitude and significance, this stuff makes Andy Fastow look like a piker. Then again, Enron violated the letter as well as the spirit of the accounting rules. The banks were smarter than Fastow in that respect, or at least their lawyers and lobbyists were.

Apr 23
2010

Financial innovation inevitably leads to crisis, says new research

Posted by Ron F in WorldcomTroubled Asset Relief ProgramRiskRegulationinnovationGoldman SachsFedEnroncomplianceBanksbanking reformBankingbank failuresbailout

Ron F

Paul Krugman's column today called my attention to a paper that anyone interested in financial reform should check out.

The paper completely contradicts the conventional wisdom that innovation in finance is a good thing.

Apr 21
2010

Shedding no further light on Lehman

Posted by Ron F in Securities and Exchange CommissionRiskRepo 105RegulationNew York FedLehman BrothersGeithnerGAAPfinancial crisisFederal ReserveFedCongresscomplianceBernankeBarney FrankBanksbank failuresbailoutsAccounting

Ron F

I have to say that today's House Financial Services Committee hearing into Lehman Brothers' collapse leaves me confused in more than one respect.

Ben Bernanke told the committee that regulatory authority over Lehman rested with the Securities and Exchange Commission under a voluntary program set up in 2004.

Mar 12
2010

Time for the Fed to articulate a real strategy

Posted by dbedell in FedDiscount ratedebtCapital

dbedell

The surprise discount rate increase last month and the FOMC  discussions over when to begin reducing its balance sheet have really highlighted the importance of transparency in how and when policymakers plan to return things to normal -- whatever that normal may be.

Whenever there is any perceived shift in fiscal or monetary policy, there is a quick reaction in debt market spreads. The current lack of a clear exit strategy is creating its own volatility in the markets.

Feb 23
2010

A disconnect at the Fed over asset sales

Posted by dbedell in stimulussecuritizationFedBernanke

dbedell

The fact that banks are once again able to raise capital is a very positive sign for US markets, however asset quality issues must still be addressed and more losses are on the horizon. As such, the timing of exits from stimulus programs by the government and US Treasury is essential, and market participants around the world – particularly those in the securitization and structured finance spaces - are watching closely as policymakers start to look at winding down support programs, selling off assets and re-evaluating fiscal and monetary policies.

How and when programs are closed and assets sold are of critical concern both to issuers and investors as it could have a big impact on tenuous market stability. With Fed officials arguing at the Federal Open Market Committee meeting in late January over when to start selling off some of the assets making up their $2.26 trillion balance sheet, that impact could be tested sooner than anyone thought likely.

Feb 18
2010

Why the Fed deserves more blame than other bank regulators

Posted by Ron F in Securities and Exchange CommissionRiskRegulationPhil GrammNew York Times Co.Glass-SteagallFederal ReserveFedderivativesCongressBernankeBanksbanking reformBankingbank failuresAlan Greenspan

Ron F

Whether a Treasury-led council of bank regulators would be more or less effective at heading off systemic financial risk than the current set-up remains to be seen.

But it couldn't be much worse. So the nonsense that St. Louis Fed President James Bullard told the Times today about the Fed's role in the financial crisis needs to be called just that.

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