Federal Reserve System

SEC to Fraudster Banks: We're Coming
August 31, 2009

After the stress test results came out a few months back, I did a piece  about how, while the government's scrubbing of bank balance sheets was certainly welcome, there were still a lot of things the banks weren't fessing up to. One of those things was loss reserves--that is, the amount of capital banks set aside to absorb losses on loans that turn bad. Here's a brief explanation: The real problem is that the banks won't fully acknowledge their losses. One of the more elusive concepts in all of accounting is an exercise known as reserving.

Worth Reading
August 27, 2009

Bernanke feels your pain: the chairman falls prey to identity theft.  Fed may not spend all $1.25 trillion set aside for mortgage securities. Society won't necessarily benefit from a post-finance job market. An argument against the banning of flash-trades? Another defense of the Taylor Rule by its creator. Has the placebo effect become more powerful?

“We Can’t Just Do Nothing”
August 27, 2009

Saviors and Survivors: Darfur, Politics, and the War on Terror By Mahmood Mamdani (Pantheon, 398 pp., $26.95) The Responsibility to Protect: Ending Mass Atrocity Crimes Once and For All By Gareth Evans (Brookings, 349 pp., $24.95) I. IN THE SUMMER OF 2007, Mahmood Mamdani found himself at a meeting of activists and politicians, listening to sentiments that had by then become quite common among a certain class of politically active Americans. The speakers were calling on the United Nations to send peacekeepers to Darfur.

Worth Reading
August 25, 2009

A judge orders the Fed to identify banks that received emergency funds. Stephen Roach: The case against Bernanke's reappointment. The transformation of Citi-group into Citi-mae. Why Canadian banks didn't implode like their counterparts in America. Libertarian support for the bailouts.

The Three Faces Of Ben Bernanke
August 25, 2009

Ben Bernanke will be nominated for a second term as chairman of the Federal Reserve. But which Bernanke are we getting? There are at least three.  The Bernanke who led the charge to rescue the US (and world’s) financial system after the Lehman-AIG collapse.  If you accept that the choice from late September was “Collapse or Rescue,” this Bernanke did a great job. The Bernanke who argued for keeping interest rates low as the housing bubble developed. This Bernanke was part of the Greenspan Illusion--the Fed should ignore bubbles and “just clean up afterwards.” Is that still Bernanke’s view?

The Logic of Reappointing Bernanke
August 24, 2009

The big news from Martha's Vineyard is that Obama is appointing Ben Bernanke to a second term as Fed chairman. I've explained before why I think this is a good idea--Bernanke has been creative, even highly unorthodox, at precisely the moment when the economy demanded these qualities from the Fed, and when a conservative, by-the-book approach would have likely sent us into a depression.

To Love, or Blame, the Fed?
August 24, 2009

Ben Bernanke's moves at the Fed have rightly attracted much praise in the last month after better-than-expected GDP and unemployment reports pointed to the end of the Great Recession. The latest signs of Fed-Love come by way of John Maggs at the National Journal's econ blog, which points to a new paper arguing for a "Fed-like approach" to budget-making. Maggs asks: "Should we and could we create a Fed for the budget?" (The paper is a highly-recommended read.) Of course, Fed criticism hasn't abated that much. The latest evidence comes from this weekend's Jackson Hole macro-econ get-together.

The Burden Is on the Inflation Hawks
August 24, 2009

The Wall Street Journal has a useful piece up today about the historical analogy that looms large in the minds of administration economic officials: 1937, the year the Fed, FDR, and Congress prematurely tightened economic policy and sent the economy back into a deep recession after several years of recovery. What I always find remarkable about these discussions is that proponents of early tightening essentially (sometimes explicitly) argue that the expected loss from too much inflation (that is, the loss weighted by the probability of it happening) is greater than the expected loss from a doub

Should Bernanke Get A Second Term?
August 14, 2009

Steve Pearlstein thinks so, and makes some good points about central bank independence and the quality of the Fed's governors along the way.

Waiting For The Fed's Next Apology
August 14, 2009

In November 2002, Ben Bernanke apologized--for the Fed's role in causing the Great Depression of the 1930s. "I would like to say to Milton [Friedman] and Anna [Schwartz]: Regarding the Great Depression. You're right, we did it. We're very sorry.

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