Federal Reserve System

Worth Reading
October 29, 2009

The Fed's not about to take away the punch bowl. Correlation of the day: A Phillies World Series win could be bad sign for the economy. Justin Fox: Are finance professors to blame for crisis? Before Freakonomics, there was Steve Landsburg, who is now blogging. Has Obama soothed our animal spirits? Somebody's still creating CDOs.

The Stock Market v. Treasury Yield Paradox, Resolved
October 29, 2009

The big market paradox of the past few months has been the differing signals coming out of the stock and U.S. Treasury markets. Stock prices have been roaring since early March, up over 50%. That should be a strong signal that economic conditions are on the upswing. But even though today's GDP report does show that the recession may have ended in the second quarter, Treasury yields have remained flat since the spring -- showing that there are some big doubts about the strength of a recovery. But Paul McCulley at Pimco says that this isn't really any sort of paradox at all.

Can We Fix Too Big to Fail Without Shrinkage?
October 28, 2009

David Wessel has a column in today’s Wall Street Journal laying out three approaches to solving our Too Big Too Fail (TBTF) problem. The first two amount to different ways of “busting them up,” as Wessel puts it.

Dan Tarullo, Regulatory Hero
October 27, 2009

Yesterday's Wall Street Journal had a pretty encouraging profile of Dan Tarullo, the Obama-appointed Fed governor. Take, for instance, this passage:  Inside the Fed, where Mr. Tarullo succeeded a Bush-appointed free-market economist in the banking oversight post, the transition hasn't been seamless. Some Fed officials said privately Mr. Tarullo can have an overbearing skepticism of banks and supervisors. Some Fed staffers are so wary of being second-guessed they ask him to approve even mundane bank applications. Sounds pretty good to me.

One More for the Grayson Files
October 27, 2009

Alan Grayson, the Democratic Congressman from Florida who's rapidly making a name for himself as the sort of liberal analogue to Michelle Bachman, is in some more hot water for calling Linda Robertson, an adviser to Fed Chairman Ben Bernanke, a “K Street whore.” Anthony Weiner probably had the best line among the various Congressional Democrats rushing to distance themselves from Grayson: “Is this news to you that this guy’s one fry short of a Happy Meal?" But I think what may be more troubling than Grayson's "K Street whore" comment is the venue in which he made it: Alex Jones's radio show.

Can Limits on Executive Pay Solve the Too Big To Fail Problem?
October 23, 2009

On Wednesday, Dan Tarullo, a governor of the Federal Reserve and distinguished law school professor, dismissed breaking up big banks as “more a provocative idea than a proposal” and instead put almost all his eggs in the “creation by Congress of a special resolution procedure for systemically important financial firms.” He stressed: “We are hopeful that Congress will, in its legislative response to the crisis, include a resolution mechanism and an extension of regulation to all systemically important financial institutions” (full speech). This put him strikingly at odds with Mervyn King, gove

High Speed Rail: Getting the Assumptions Right
October 20, 2009

With a just-released Brookings report suggesting that high speed rail (HSR) could mitigate excessive congestion at airports, it would be nice to know if and where rail is a viable investment.

Who Will Be the Next Carlos Slim?
October 18, 2009

The U.S. increasingly displays characteristics that we have seen many times in middle-income “emerging markets”--new dimensions of vast inequality, forms of financial instability that benefit the best connected, and consistently easy credit for the privileged. But this raises the question: Who exactly is going to dominate our economic and political landscape moving forward?  In most emerging markets, a major crisis means that some powerful people and their firms fall from grace.

Why the Fed Can't Do Consumer Regulation
October 18, 2009

Back in August I flagged an old Larry Summers lecture arguing that agencies (like the Fed) that keep an eye on bank safety and soundness shouldn't also be tasked with looking out for consumers, since the two mandates can conflict. Summers elaborated on this theme in a speech Friday at the Economist's "Buttonwood" conference: [A]ny regulatory agency that has as its primary mission the soundness and profitability of the banking system or the financial system cannot be relied on to pursue objectives that are potentially inconsistent with that overall mandate with sufficient vigor.

Re-Thinking the Mancession
October 17, 2009

Continuing Catherine Rampell's series charting the employment recession, here are some more graphs from a new paper by St. Louis Fed economists Kristie Engemann and Howard J. Wall.