David Kirkpatrick

October 21, 2010

Latest Beige Book still bland …

Filed under: Business, Politics — Tags: , , , , , — David Kirkpatrick @ 8:48 pm

… but hints at Fed action to come.

From the link:

Economic growth continued at a sluggish pace over the past few weeks, the Federal Reserve said Wednesday, supporting views that the Fed might take action to spur the economy at its next policy meeting.

In its latest snapshot of regional economic conditions, the Fed reported some bright spots in manufacturing, travel, tourism and auto sales, but still saw weakness in the housing market.

The report, known as the Beige Book, summarized economic conditions in the central bank’s 12 districts across the nation. It will help set the tone for the Fed policy meeting set to take place Nov. 2-3. Investors are widely expecting an announcement of another round of asset purchases.

“The lack of meaningful improvements leaves investors anticipating additional action by the Federal Reserve to reinvigorate the economy in November,” said Kathy Lien, director of currency research for GFT, in a research note.

“If the Fed was worried about the recovery in September, they will remain worried in November as there was no major pickup in economic activity,” Lien said.

 

September 9, 2010

Latest Beige Book outlook not so bright

Filed under: Business, Politics — Tags: , , , , , — David Kirkpatrick @ 11:15 am

The Great Recession, the near-depression, economic downturn — whatever you want to label the economy of the last years with, it all comes down to it’s not good, hasn’t really gotten appreciably better for Main Street and doesn’t really seem like tangible recovery is even visible on the horizon. So it’s another fall of keeping the chin up and tightening the belt a little bit more once again.

From the link:

The mixed picture is in line with government data released last month that showed U.S. gross domestic product, the broadest measure of economic activity, was much weaker in the second quarter than previously estimated.

The nation’s GDP was revised sharply lower to an annual growth rate of 1.6% in the three months ending in June. The initial reading had been for a 2.4% growth rate in the period.

Fed chairman Ben Bernanke acknowledged in a speech late last month that the U.S. economic recovery has lost considerable steam. But he said the central bank is prepared to use “unconventional measures” to boost the economy if the outlook were to “deteriorate significantly.”

In its Aug. 10 policy statement, the Fed announced plans last month to begin reinvesting proceeds from securities in its $2 trillion portfolio in to U.S. Treasurys. The central bank had bought billions worth of government debt two years ago to keep interest rates low on home and other consumer loans. But minuets from the August meeting subsequently showed that Fed officials were unusually divided over the policy.

August 12, 2010

Economic recovery weakening …

Filed under: Business, Politics — Tags: , , , , , — David Kirkpatrick @ 2:23 am

… per the Fed. Not good news out there at all, and a lot of us are really feeling it right now.

From the link:

The U.S. economic recovery is weakening, the Federal Reserve warned at the conclusion of its meeting Tuesday, its most bearish outlook in more than a year.

“The pace of recovery in output and employment has slowed in recent months,” the Fed said in its statement. It said while it still expects the economy to grow, the improvement will be “more modest in the near term than had been anticipated.”

August 7, 2010

Bush tax cuts find foe in Greenspan

Filed under: Business, Politics — Tags: , , , , , , — David Kirkpatrick @ 10:26 am

Alan Greenspan’s post-Fed chair economic line has been quite different from how he wielded power for almost twenty years. His latest seeming apostasy is to call for repealing the Bush 43 tax cuts. I’ll have to admit I agree with the sphinx here. I’m certainly fiscally conservative, but I’m not fiscally stupid, and I’m certainly not one of those fiscal hardliners (hardheaders?) who would prefer to see the United States go completely bankrupt than to implement a serious monetary policy that matches the facts on the ground.

From the link:

It was not enough, it seems, for Alan Greenspan, the former Federal Reserve chairman and a self-described lifelong Republican libertarian, to call for stringent government regulation of giant banks, as he did a few months ago.

Now Mr. Greenspan is wading into the most fierce economic policy debate in Washington — what to do with the tax cuts adopted, in large part because of his implicit backing, under President George W. Bush — with a position not only contrary to Republican orthodoxy, but decidedly to the left of President Obama.

Rather than keeping tax rates steady for all but the wealthiest Americans, as the White House wants, Mr. Greenspan is calling for the complete repeal of the 2001 and 2003 tax cuts, brushing aside the arguments of Republicans and even a few Democrats that doing so could threaten the already shaky economic recovery.

“I’m in favor of tax cuts, but not with borrowed money,” Mr. Greenspan, 84, said Friday in a telephone interview. “Our choices right now are not between good and better; they’re between bad and worse. The problem we now face is the most extraordinary financial crisis that I have ever seen or read about.”

July 15, 2010

Per Fed, economic recovery slowing

Filed under: Business, Politics — Tags: , , , , , , — David Kirkpatrick @ 1:40 pm

This is very easy news to believe. Things are still pretty rough out there.

From the link:

Federal Reserve policymakers, acknowledging a slowing in the economic recovery at their meeting in late June, began to consider the possibility of providing additional stimulus if growth fell sharply — a possibility that has become all the more real as signs of weakness have piled up.

June 30, 2010

Interest rates are going to stay low

Filed under: Business, Politics — Tags: , , , , — David Kirkpatrick @ 11:56 pm

In other words, move along everyone — there’s nothing to see here

From the link:

Jitters that financial strains may derail the U.S. economic recovery mean the Federal Reserve will be in no rush to end its ultra-low interest rates, comments by officials of the U.S. central bank suggested on Wednesday.

One senior Fed official went as far as acknowledging that falling inflation could spur the central bank to further ease financial conditions, and another policy maker would not rule out additional measures to stimulate growth.

When asked whether lower inflation would prompt the Fed to try to push borrowing costs even lower, Atlanta Federal Reserve President Dennis Lockhart told a Rotary Club audience: “It’s appropriate to think about what we would do under a deflationary scenario. At this point, no specific planning in my view is occurring but discussion in all likelihood will be on the agenda.”

June 17, 2010

Fed clamping down on financial sector

As I’ve written many, many times, I’m no fan of government regulation, but increased oversight is probably necessary in the financial world right now. You can’t blame the sector’s companies for seeking as much profit as possible, but the United States’ — and the world’s for that matter –economy simply can’t handle bad actors that are deemed “too big to fail.

Too big to fail should mean too big to have autonomy. Any financial institution that wants to get out from under the thumb of the Fed ought to have the opportunity to break down into separate, more streamlined units that could fail if the market so determines without taking everyone else out with them.

From the link:

The Federal Reserve is working to beef up oversight of financial companies to better protect the nation from another financial crisis in the future, chairman Ben Bernanke said Wednesday.

June 1, 2010

The recession and the unemployment benchmark

The question is did the recession push the unemployment benchmark to around seven percent, and if so will the Fed do damage to an already fragile economy by sticking with the previous benchmark of around five percent.

Certainly food for economic thought.

From the link:

Federal Reserve policy makers say full employment means a long-term jobless rate between 5 percent and 5.3 percent. Some of the most influential economists say they’re wrong.

Dean Maki at Barclays Capital, 2006 Nobel Prize-winner Edmund Phelps and Bank of America-Merrill Lynch’s Ethan Harris estimate the worst financial crisis since the Great Depression has pushed the so-called natural rate of unemployment to between 6.3 percent and 7.5 percent. Unless the Fed accepts that more Americans will be permanently out of work, the central bank may spur inflation by waiting too long to raise its benchmark rate from a record low, said Maki, Barclays’ chief U.S. economist and the most accurate forecaster in a December 2009 Bloomberg News survey.

April 8, 2010

Economy may be improving, but unemployment still a drag

Filed under: Business, Politics — Tags: , , , , — David Kirkpatrick @ 7:01 pm

There may be some economic pollyannas starting to make appearances, but don’t count Fed chief Ben Bernanke among them. His exact quote the current state of things? “Far from being out of the woods.” Those aren’t the words of someone who’s feeling real good about the economy right now.

From the second link:

Bernanke said he expects the Fed’s easy money policies and a gathering recovery “will be sufficient to slowly reduce the unemployment rate over the coming year” from its current level of 9.7%. But he admitted that the jobless rate remains a major concern.

“The economy has stabilized and is growing again, although we can hardly be satisfied when 1 out of every 10 U.S. workers is unemployed and family finances remain under great stress,” Bernanke said.

The Fed chief also noted that bank lending continues to be weak and inflation expectations stable. Those observations should allow the central bank to continue to hold short-term interest rates near zero percent for what the Fed has called an “extended period” while keeping prices stable.

March 7, 2010

Look for the Fed to raise interest rates this fall

The Federal Reserve has already borrowed $200 billion and parked it in the Treasury for just this move.

From the second link:

Most U.S. business economists expect the Federal Reserve to raise benchmark interest rates within six months by between a quarter and a half percentage point, according to a survey released on Monday.

A majority of economists in the National Association of Business Economists’ semiannual survey found the Fed’s current stance of rates near zero percent is appropriate. A growing number, however, believe the U.S. central bank’s policy’s are too stimulative, according to a poll of 203 members taken February 4-22.

“A majority believes that a rise in interest rates is both likely and appropriate in the next several months,” said NABE President Lynn Reaser.

March 4, 2010

Latest Beige Book outlines slow recovery

Filed under: Business — Tags: , , , , — David Kirkpatrick @ 1:23 pm

The quick recap — yep, things are getting better, and no, not very quickly. And all that snow in February didn’t help things. The coming unemployment report is expected to show the rate rising to 9.8 percent.

From the link:

Of the Fed’s 12 regions surveyed, nine showed improvement. The Richmond district, which includes Maryland, Virginia and the Carolinas, was hurt the most by the bad winter. That region reportedeconomic activity had “slackened or remained soft across most sectors” because of the weather.

The economic setbacks from the weather come at a fragile time: The economy is struggling to recover from the worst and longest recession since the 1930s.

After a big growth spurt at the end of 2009, many economists believe the recovery lost steam in the first three months of this year. They predict it will grow at a pace of around 3 percent from January to March. That won’t be fast enough to drive down the unemployment rate, now at 9.7 percent.

The jobs market “remained soft throughout the nation,” the Fed reported.

Update 3/7/10 — If you feel the urge, or just want, to dig much deeper into this Beige Book report, hit this link for a 538 post full of charts and analysis.

February 24, 2010

The Fed’s borrowing $200 billion …

… to prep for raising the interest rate.

January 14, 2010

The latest Fed Beige Book sees …

Filed under: Business, Politics — Tags: , , , — David Kirkpatrick @ 4:58 pm

… well, beige. Things aren’t getting worse, but they aren’t really getting all that much better either.

From the link:

“While economic activity remains at a low level, [economic] conditions have improved modestly” according to the Federal Reserve’s Beige Book released in advance of the Federal Open Market Committee’s January 26-27 monetary policy meeting. The Beige Book said the “improvements are broader geographically” than they were at the beginning of December. The Beige Book reiterated concerns about the labor market.

The Beige Book was compiled on the basis of reports at the 12 Federal Reserve districts as of January 4. While the Beige Book provides an anecdotal snapshot of the economy, it is rarely cited in the minutes of the FOMC meetings, though the minutes note participants also refer to anecdotal reports.

The details of the report were less optimistic than the opening paragraph.

December 11, 2009

Americans richer — on paper

Filed under: Business — Tags: , , , , , — David Kirkpatrick @ 3:58 pm

As far as this goes, it’s good news. It’s also a nice reminder that a lot of personal economic woes are purely paper losses (and then gains when things start rebounding like right now.) Not to understate the real pain being felt out there, but when the media starts tossing gigantic numbers around it’s always a good idea to keep a little perspective.

From the first link:

Americans got wealthier for a second straight quarter in the fall, thanks to gains in stock investments and home values.

Net worth — the value of assets such as homes, bank accounts and investments, minus debts like mortgages and credit cards — rose 5% from the second quarter to $53.4 trillion, the Federal Reserve said Thursday.

Yet even with that gain, Americans’ net worth remains far below the revised peak of $64.5 trillion reached before the recession began. That underscores the vast loss of wealth over the past two years. Net worth would need to rise an additional 21% just to return to its pre-recession peak.

And many analysts don’t expect a repeat of the strong second- and third-quarter gains anytime soon. That’s why Scott Hoyt, senior director of consumer economics at Moody’s Economy.com, thinks household wealth won’t match its pre-recession peak until about 2012.

December 3, 2009

Modest economic improvement according to latest Beige Book

Filed under: Business, Politics — Tags: , , , , — David Kirkpatrick @ 1:44 pm

Of course unemployment remains the fly in this economic ointment.

From the link:

The US Federal Reserve has said that economic activities have improved modestly in recent months, primarily helped by better consumer spending.

However, the labour market situation continued to remain weak with rising layoffs and sluggish hiring activities, the apex bank noted.

The Federal Reserve’s Beige Book, which provides a snapshot of economic activities in the 12 districts, said “economic conditions have generally improved modestly” in recent months.

In eight districts, the activities witnessed improvement while it remained little or mixed in the remaining four.

November 5, 2009

Fed sees overnight lending rates remaining around nil …

Filed under: Business, Politics — Tags: , , , — David Kirkpatrick @ 3:22 pm

for an “extended period.”

October 23, 2009

Latest Fed Beige Book?

Filed under: Business — Tags: , , , , — David Kirkpatrick @ 1:12 am

The news is rather, er, beige.

From the link:

U.S. consumer spending was weak in most parts of the U.S. during late summer and early fall, leaving unexciting prospects for economic growth into the rest of 2009.

In a report Wednesday, the Federal Reserve said its 12 districts indicated either stabilization or modest improvements from depressed levels in many sectors of the economy

September 19, 2009

Americans are $2T wealthier

Filed under: Business — Tags: , , , , — David Kirkpatrick @ 3:42 pm

At least on paper for Q2 against Q1. All thanks to a stock market recovery.

From the link:

After nearly two years of declines, the net worth of Americans rose by $2 trillion to an estimated $53.1 trillion in the second quarter compared with the first three months of the year.

The soaring stock market accounted for much of the gain. Stock holdings rose by 22% to $6.3 trillion, while mutual funds’ value jumped 15% to $3.7 trillion, according to a Federal Reserve report released Thursday.

To be sure, these are not exactly flush times for many people. Unemployment stands at 9.7%, the highest level in 26 years. And many people have yet to see their home values and portfolios recover from their recent trouncing.

Since only half of Americans own stocks, with even fewer having significant holdings, only a narrow group of people benefited from Wall Street’s springtime gains. The Dow Jones industrial average and the Nasdaq had their best performances since 2003 and the broader S&P 500 since 1998.

Homeowners, who make up about two-thirds of the population, also saw a little relief. Real estate rose in value for the first time since the end of 2006, climbing 2% to $18.3 trillion.

Still, Americans have a long way to go before they recover the wealth they once had. U.S. net worth peaked at $65.3 trillion in the third quarter of 2007. That’s 18.7% higher than the current level.

September 10, 2009

Fed’s latest Beige Book summary

Filed under: Business, Politics — Tags: , , , — David Kirkpatrick @ 1:51 pm

The whole thing.

The real quick version:

Reports from the 12 Federal Reserve Districts indicate that economic activity continued to stabilize in July and August. Relative to the last report, Dallas indicated that economic activity had firmed, while Boston, Cleveland, Philadelphia, Richmond, and San Francisco mentioned signs of improvement. Atlanta, Chicago, Kansas City, Minneapolis, and New York generally described economic activity as stable or showing signs of stabilization; St. Louis remarked that the pace of decline appeared to be moderating. Most Districts noted that the outlook for economic activity among their business contacts remained cautiously positive.

August 18, 2009

Credit crunch continues

The headline for this linked article is, “Fewer banks tightened credit standards, Fed reports.” Very misleading in terms of the reality on the ground.

Here’s the real news from the subhead:

But credit availability probably won’t return to normal before mid-2010, report says. Also, the Fed and Treasury extend the TALF emergency financing program aimed at boosting lending.

August 14, 2009

Here’s a handy bailout tracker …

from CNNMoney.

Want to see what’s happening with all that bailout money and what’s gone where with Troubled Asset Relief Program, Federal Reserve rescue efforts, Federal stimulus programs, FDIC bank takeovers and other financial and housing initiatives, plus the dollars handed over to Amerian International Group, take a few minutes and hit the link.

July 16, 2009

Fed offers mixed signals

Filed under: Business, Politics — Tags: , , , — David Kirkpatrick @ 3:33 pm

I’m going with they still don’t have a clue what is happening or what is going to happen over the next six to twelve months.

From the link:

The unemployment rate could top 10% later this year, the Federal Reserve said Wednesday, but the central bank also said it believes the end of the recession could be in sight.

June 11, 2009

Notes from the latest Fed Beige Book

Filed under: Business, Politics — Tags: , , , — David Kirkpatrick @ 4:52 pm

This link covers material from all twelve regional Federal Reserve banks.

From the link:

DALLAS

(This region covers Texas and parts of New Mexico and Louisiana.)

Activity was weak, but there were “increased reports of stabilization” from manufacturers. Business outlooks slightly more optimistic. Some producers linked to housing construction said the pace of decline in activity had eased and “demand was bumping along the bottom.”

Some improvement in retail sales with customers returning, but “very cost conscious.” Most retailers don’t expect any “solid improvement” until 2010. Homebuilders reported a slight uptick in sales, helped by first-time home buyer tax credit. Commercial real estate activity softened. In the energy sector, demand for oil services and machinery fell as drilling activity plunged. Dry conditions hampered agriculture production in Southwest Texas.

SAN FRANCISCO

(This region covers California, Washington, Oregon, Idaho, Nevada, Utah, Arizona, Hawaii and Alaska.)

Economic activity slowed further, but there were reports pointing to “signs of stabilization or improvement in some sectors.” Retail sales were “feeble” with shoppers favoring inexpensive necessities over luxury goods. Sales rose for grocers, but were “anemic” for retailers of furniture, appliances and electronic items.

Manufacturing activity remained at low levels, but conditions improved for makers of semiconductors and other information technology products. Housing market remained weak but showed signs of improvement. Many areas reported a pickup in sales aided by low mortgage rates, declining prices and high foreclosure rates. The pace of home construction remained very slow. Demand for commercial space fell, with vacancy rates rising. Some tenants have requested and received concessions on lease rates for office and retail space.

May 29, 2009

Small business should go to small banks for loans

Filed under: Business — Tags: , , , , — David Kirkpatrick @ 4:43 pm

It’s a confusing credit situation out there for small business, but it looks like entrepreneurs who hit up smaller banks for money have a much greater chance of securing the needed loan. If this plays out correctly on the ground it could get small business and small banking back on the same team.

At one point in time bank mangers and presidents had personal relationships with small business owners and could make gut-level decisions to help the entrepreneurs. As all the business went toward larger banks small business owners were subject to the whims of loan risk algorithms and random policy shifts that could, and did, impact the bottom line.

A friend of mine last year went through just that with a major bank that doesn’t exist in name any longer. A policy shift and manager transfer left his account wildly overdrawn for no reasonable reason from a business perspective. The event cost him a fair bit of money, but luckily not any contractors working under him or contracts he was servicing.

Small business owners, the lesson is get local with your banking, and hopefully you’ll develop relationships that can last with the decisions makers at your local banking institution.

From the link:

At first blush, the evidence seems contradictory. On one hand, many national banks have drastically cut back small-business lending. In addition, Advanta, a major issuer of small-business credit cards, declared on May 12 that it was closing customer accounts to new charges.

 On the other hand, the Federal Reserve’s April survey of lending practices showed credit conditions have loosened. The Small Business Administration says the weekly volume of loans to small businesses is up more than 25 percent since March. And community banks, those smallish, old-fashioned institutions that make up the vast majority of the country’s 8,300 banks, say that they are ready to take back customers from the national lenders.

Much of the confusion has its roots in contrasting banking strategies. Big national banks are much more likely to have been drawn into the morass of securitized loans, credit-default swaps and the like, which has forced them to preserve capital by curtailing lending.

The smaller banks, meanwhile, have traditionally made their livings off of loans that they carry on their own balance sheets to individuals and small businesses. For them, despite the economic crisis, the current situation is more or less business as usual.

Indeed, a May survey of 1,500 small businesses by Barlow Research Associates found that companies that applied to small banks for loans in the past year were three times as likely to get credit as those who applied to large banks.

May 21, 2009

Fed sees longer recession

Filed under: Business, Politics — Tags: , , , , — David Kirkpatrick @ 2:50 pm

I hate to always blog about tough financial news or to dispute what I see as overly rosy near-term projections, but I think reality should trump blind wishes. Particularly when those wishes will most likely be dashed in short order.

In an interview I was asked my operating philosophy of life and my response was “optimistic pessimism,” which for me is a succinct way of saying I hope for the best and plan for the worst. Optimistic pessimism is a very prudent way to view the world’s economy in both bad and good times.

From the link:

Federal Reserve officials fear the recession is worse than recent projections and that the recovery could drag on for two years as unemployment continues to edge higher, according to the minutes from the Fed’s April meeting.

Some members noted that it might be necessary to raise the amounts of mortgage and Treasury securities purchased above the $1.75 trillion that the government has already committed to buying.

“Some members noted that a further increase in the total amount of purchases might well be warranted at some point to spur a more rapid pace of recovery,” according to the minutes of the April 28-29 meeting.

The buying programs were put in place to create liquidity for these types of securities created from loans, and to serve as a catalyst for lending in an effort to thaw frozen credit markets.

The Federal Open Market Committee minutes are always released three weeks after the meeting is held. 

As widely expected, the Fed left a key interest rate alone at that meeting, leaving the target federal funds rate at a range near zero. 

Fed officials have said rates will stay “exceptionally low…for an extended period,” which some analysts have interpreted as meaning possibly into next year.

The economy looked a little brighter three weeks ago when Fed officials released a statement at the conclusion of their two-day meeting. Things are less rosy now.

May 8, 2009

About those bank stress tests

Here’s more information on the nuts and bolts.

From the link:

The Federal Reserve marshaled hundreds of supervisors to spend 45 days rigorously reviewing the banks’ detailed loan data. They applied exacting estimates of potential losses over two years, along with conservative estimates of potential earnings over the same period, and compared them with existing reserves and capital. The results were then evaluated against strict minimum capital standards, in terms of both overall capital and tangible common equity.

The effect of this capital assessment will be to help replace uncertainty with transparency. It will provide greater clarity about the resources major banks have to absorb future losses. It will also bring more private capital into the financial system, increasing the capacity for future lending; allow investors to differentiate more clearly among banks; and ultimately make it easier for banks to raise enough private capital to repay the money they have already received from the government.

The test results will indicate that some banks need to raise additional capital to provide a stronger foundation of resources over and above their current capital ratios. These banks have a range of options to raise capital over six months, including new common equity offerings and the conversion of other forms of capital into common equity. As part of this process, banks will continue to restructure, selling non-core businesses to raise capital. Indeed, we have already seen banks, spurred on by the stress test, take significant steps in the first quarter to raise capital, sell assets and strengthen their capital positions. Over time, our financial system should emerge stronger and less prone to excess.

Banks will also have the opportunity to request additional capital from the government through Treasury’s Capital Assistance Program. Treasury is providing this backstop so that markets can have confidence that we will maintain sufficient capital in the financial system. For institutions in which the federal government becomes a common shareholder, we will seek to maximize value for taxpayers and enable these companies to attract private capital, thereby reducing government ownership as quickly as possible.

Some banks will be able to begin returning capital to the government, provided they demonstrate that they can finance themselves without F.D.I.C. guarantees. In fact, we expect banks to repay more than the $25 billion initially estimated. This will free up resources to help support community banks, encourage small-business lending and help repair and restart the securities markets.

May 1, 2009

Text of Fed’s interest rate statement

Filed under: Business, Politics — Tags: , , — David Kirkpatrick @ 1:08 pm

The statement:

Text of the Federal Reserve’s Statement on Interest Rates
Following is the text of the statement by the Federal Reserve on Wednesday announcing it was holding its base federal funds target rate at a record low between zero and 0.25 percent:Information received since the Federal Open Market Committee met in March indicates that the economy has continued to contract, though the pace of contraction appears to be somewhat slower. Household spending has shown signs of stabilizing but remains constrained by ongoing job losses, lower housing wealth and tight credit. Weak sales prospects and difficulties in obtaining credit have led businesses to cut back on inventories, fixed investment and staffing. Although the economic outlook has improved modestly since the March meeting, partly reflecting some easing of financial market conditions, economic activity is likely to remain weak for a time. Nonetheless, the committee continues to anticipate that policy actions to stabilize financial markets and institutions, fiscal and monetary stimulus, and market forces will contribute to a gradual resumption of sustainable economic growth in a context of price stability.

 

In light of increasing economic slack here and abroad, the committee expects that inflation will remain subdued. Moreover, the committee sees some risk that inflation could persist for a time below rates that best foster economic growth and price stability in the longer term.

In these circumstances, the Federal Reserve will employ all available tools to promote economic recovery and to preserve price stability. The committee will maintain the target range for the federal funds rate at 0 to one-quarter percent and anticipates that economic conditions are likely to warrant exceptionally low levels of the federal funds rate for an extended period.

As previously announced, to provide support to mortgage lending and housing markets and to improve overall conditions in private credit markets, the Federal Reserve will purchase a total of up to $1.25 trillion of agency mortgage-backed securities and up to $200 billion of agency debt by the end of the year. In addition, the Federal Reserve will buy up to $300 billion of Treasury securities by autumn.

The committee will continue to evaluate the timing and overall amounts of its purchases of securities in light of the evolving economic outlook and conditions in financial markets. The Federal Reserve is facilitating the extension of credit to households and businesses and supporting the functioning of financial markets through a range of liquidity programs. The committee will continue to carefully monitor the size and composition of the Federal Reserve’s balance sheet in light of financial and economic developments.

Voting for the F.O.M.C. monetary policy action were: Ben S. Bernanke, chairman; William C. Dudley, vice chairman; Elizabeth A. Duke; Charles L. Evans; Donald L. Kohn; Jeffrey M. Lacker; Dennis P. Lockhart; Daniel K. Tarullo; Kevin M. Warsh; and Janet L. Yellen.

April 16, 2009

Fed sees light at the end of tunnel

Filed under: Business, Politics — Tags: , , , , , — David Kirkpatrick @ 3:11 pm

The latest beige book report goes for optimism. I’m guessing they’re more just satisfied things aren’t spiraling even further down as opposed to seeing anything worth getting excited about. But I’ve been pretty contrarian about this financial crisis going back to the first days of this blog.

From the first link:

The Fed’s “Beige Book,” which offers an anecdotal look at economic activity in its 12 districts, said that “overall economic activity contracted further or remained weak,” noting that areas such as manufacturing were still depressed.

But the report said that five of the districts “noted a moderation in the pace of decline, and several saw signs that activity in some sectors was stabilizing at a low level.”

The positives may have been the “green shoots” that Fed Chairman Ben Bernanke referred to recently when saying he saw some signs of life in the economy.

It was “consistent with the recent data that have shown improvement in some sectors of the economy, particularly consumption and housing,” said Michelle Meyer of Barclays Capital.

“While downward pressure continues, the pace of the declines may be easing up, somewhat. Not a major surprise in light of the data we’ve seen for March, but noteworthy nonetheless,” said Ian Lyngen of RBS Securities. “That said, the overall picture remains negative for the U.S. economic outlook — home prices continuing to decline and credit remaining ‘very tight’ throughout the country.”

In finance, the Beige Book said “bankers reported tight credit conditions, rising delinquencies and some deterioration of loan quality.”

Though the report said home prices and construction were largely falling, “better-than-expected buyer traffic led to a scattered pickup in sales in a number of Districts.”

March 23, 2009

Fed buying up additional $1T-plus in securities

Filed under: Business, Politics — Tags: , , , — David Kirkpatrick @ 4:05 pm

The sheer hugeness of all the dollar figures being thrown around by the Fed, Treasury and Congress is staggering. Hopefully this will work. If nothing else, it is truly unprecedented.

From the link:

The Federal Reserve’s surprise announcement Wednesday that it would purchase more than $1 trillion in Treasury securities and mortgage bonds in hopes of sparking greater economic activity shows that Chairman Ben Bernanke is working hard to keep his pledge to do whatever it takes to reverse the nation’s deep recession.

The Fed’s rate-setting Federal Open Market Committee ended a two-day meeting with the announcement that it would leave its benchmark federal funds rate near zero. That was expected. Unexpected was word that the Fed would now aggressively purchase assets to get money flowing across the broader economy.

“It’s a decision by the committee to go all out,” said Laurence Meyer, a former Fed governor from 1996 to 2002, joking that “every move these days is historic and unprecedented.”

March 19, 2009

The Fed’s printing money

This move could really hurt the dollar, and is seen by many (most?) economists as a true “nuclear option.” Make sure you’re belted in — this ride ain’t over yet.

From the link:

Expectations of Fed buying raised the prices, and consequently pushed down the interest rate yields, on mortgage-backed securities as well as Treasury bonds, which were included in the deal. Stocks rose slightly as well, while the dollar fell on inflation worries. The yield on the benchmark 10-year Treasury note plummeted one-half percentage point, to around 2.5%.

“The good news is that the Fed is clearly being a lot more aggressive,” said Desmond Lachman, a resident fellow at the American Enterprise Institute. “The bad news is that I think it reflects their assessment that the economy is a whole lot weaker than they thought it would be.”

The Fed did not cut short-term interest rates because it can’t—they’re already at virtually zero. The post-meeting statement said the rate-setting Federal Open Market Committee “anticipates that economic conditions are likely to warrant exceptionally low levels of the federal funds rate for an extended period.”

The FOMC statement was full of surprises, albeit in the Fed’s typical bland language. The Fed committed itself to buying another $750 billion this year in mortgage-backed securities issued by “agencies” like Fannie Mae and Freddie Mac, on top of the $500 billion it had already committed to buying. It doubled to $200 billion the amount of agency debt it will buy this year.

And in a surprising change of direction, the Fed said it will buy $300 billion of longer-term Treasury securities. Up until now, Federal Reserve Chairman Ben Bernanke had said there was no need for the Fed to buy Treasuries since there was a strong market for them already. The Fed’s new thinking seems to be that it can’t hurt to try a little Treasury buying in hopes that the money will trickle down to non-Treasury securities. It said the goal of the Treasury purchases is “to help improve conditions in private credit markets.”

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