Commenting on the health of big U.S. banks last week, former Fed Chairman Ben Bernanke wrote on his Brookings blog that “a lot of progress has been made (and more is in train) toward reducing the risks that large, complex financial institutions pose for the financial system and the economy.” Bernanke’s observation came after Minneapolis Fed president Neel Kashkari’s recent commentary about the need to reduce the alleged problem of “Too Big To Fail” within banking. Some readers could be excused for wondering why Bernanke would have any opinion on the matter at all.
Ben Bernanke’s new book, The Courage to Act, demonstrates throughout its 579 pages the fundamental uncertainty faced by central bankers, Treasury officers, and everybody else when dealing with financial cycles, panics and recoveries. “But if the last few years had taught us anything, it was that we had to be humble about our ability to detect emerging threats to financial stability,” he writes.
Huzzah: last week Congress passed, in bipartisan fashion, a five-year, $300 billion-plus transportation bill. President Obama is expected to sign the legislation. The bill provides for much-needed infrastructure development. Beyond that it fixes a constitutional infirmity; corrects an institutional oddity that’s been with us since 1913; and even promises better food service on Amtrak. Miracles happen, and not just in Bethlehem. Okay, I take that back. Making ready allowance for the usual sausage-making (which I’m happy to tolerate, within bounds) this enactment is mostly smh stuff. Start with the ostensible constitutional fix: the act makes Amtrak’s President, who is appointed by its…
This past Friday, the U.S. Department of Justice filed its expected petition for certiorari in Texas v. United States, involving several states’ challenge to the administration’s “deferred action” program (“DAPA”). DAPA would grant deferred action—and, along with it, work permits and other benefits—to several million immigrants who are unlawfully present in the United States. The Fifth Circuit Court of Appeals affirmed a preliminary injunction against DAPA on November 9; DoJ’s petition to review that preliminary ruling on an expedited schedule arrived within a fortnight. Why the haste, my child? Well, on an expedited schedule this case could still be heard and…
The Swiss National Bank (SNB) has just announced an eye-popping net loss for the first quarter of 2015: 30 billion Swiss francs, or $32 billion. A participant in its recent shareholders meeting shortly before the announcement told me “the directors looked very stressed.”
How does a money-printing central bank lose money?
The “Audit the Fed” proposal of Senator Rand Paul (R-Ky.) elicits a surprising amount of emotion, from opponents and supporters alike. Why should this be?
“Monetary policy” purposefully sounds technical and dull—you like it that way if you want to keep it the domain of supposedly objective experts who don’t want any mere politicians interfering in their elite central banking club. But money affects everybody and is an emotional topic, especially if the Fed is on purpose crushing you, as it currently is doing to savers, in order to benefit borrowers and speculators.
What if a profound economic downturn occurred and the federal government basically ignored it? Couldn't happen, right? In his latest book, The Forgotten Depression, James Grant details for us the depression of 1921 and how it was permitted to cure itself. We discuss in this podcast how the Wilson* and Harding administrations let prices and wages fall, balanced the budget, and raised interest rates through the Federal Reserve. The result was a painful and, more importantly, quick depression that righted itself by late 1921, setting the stage for the economic growth of the 1920s. The comparisons are easy and telling. The…
In the financial crisis of 2007 through 2009, the Federal Reserve expanded its balance sheet to finance the bust, just as intended by its legislative fathers of a century ago. They did not, of course, intend for their creation to have stoked the housing bubble in the first place. This dramatic action to make up for its own mistakes was not a first—recall the Fed’s celebrated anti-inflation strategy of the early 1980s, a reaction to its 1970s blunders that had created the Great Inflation of that previous time.
The latest crisis has been over for five years, but the Fed’s balance sheet is more bloated than ever. Its much-discussed “taper” only slowed down the rate of bloating.
In her first formal appearance as head of the United States Federal Reserve, Janet Yellen obliquely suggested the Fed might not raise its mighty “federal funds” rate to tighten the economy until months after its Quantitative Easing bond purchasing ended completely, coyly portending cheap money indefinitely. The market shuddered but soon calmed at the soothing voice of its controller.