With just nine months to go in the Beard Era, the time has come for the press to start casting about for a successor. There’s the obvious one: Janet Yellen, Fed vice chairwoman, who has friends and foes, according to the Gray Lady. Apparently, though, she may be a little too worried about getting people jobs, and not worried enough about whipping inflation now. Read more »
Tim Geithner basically spent the last four years trying and failing, numerous times, to leave Washington, i.e. his own personal torture chamber, but according to Chaz Gasparino, the former Treasury Secretary may allow himself to be pulled back in. Sayeth CG: Read more »
Today the Federal Reserve released transcripts of its 2007 FOMC meetings. The Fed has a policy of releasing these transcripts with a five-year lag. This has various advantages in terms of encouraging candor and allowing the FOMC members to discuss material nonpublic information, etc., but it has the singular disadvantage of making them look like idiots, because everyone else is five years smarter than they are. “Hahaha William Dudley thinks that Bear Stearns is fine! Bear disappeared like four years ago! Has he been living under a rock? What a moron!”
Still I think the advantages of delay outweigh the disadvantages, for the Fed. Here is Dudley in August 2007 on Bear, etc.:
As far as the issue of material nonpublic information that shows worse problems than are in the newspapers, I’m not sure exactly how to characterize that because I guess I wouldn’t know how to characterize how bad the newspapers think these problems are. [Laughter] We’ve done quite a bit of work trying to identify some of the funding questions surrounding Bear Stearns, Countrywide, and some of the commercial paper programs. There is some strain, but so far it looks as though nothing is really imminent in those areas. Now, could that change quickly? Absolutely. For example, one question that we’re following with Bear Stearns is what their clients do in terms of continuing to want to do business with them. Obviously, if people start to pull back in their willingness to do business with Bear Stearns, the franchise value of the company goes down, and that exacerbates the problem. One thing that we have heard about Bear Stearns is that they have approached a number of major commercial banks about a secured line of credit. We don’t know what the outcome will be, but they are clearly trying to get even better liquidity backstops than those they have in place today. But as far as we know, they have enough liquidity—and Countrywide as well at this moment.
Laugh if you want, but that’s sort of the thing about banks and liquidity: it’s there one day, and gone the next, and its disappearance is never predictable because as soon as it becomes predictable that your liquidity will disappear, it has already disappeared. However good may be your arguments. Bear, at the time, really was drowning in liquidity.1 Dudley just looks a little wrong in hindsight; the guys at Bear who were working to bail their sinking ship had no choice but to make contemporaneous public statements about their liquidity that were true until they weren’t. And that looked, by virtue of the quick flip between “drowning in liquidity” and just “drowning,” like they weren’t true – in a liability-incurring way – even when they were.
The transcripts don’t seem particularly laughable to me2; the FOMC members seem serious and sensible and earnest and informed and reasonably on top of current events without being all that on top of the future.3 This is called the efficient markets hypothesis. Here is Ryan Avent: Read more »
Lacker’s used every opportunity to let Bernanke and his rotating cast of puppets know that they’re wrong about the stimulus and that they’re imperiling what used to be the Fed’s only mission, controlling inflation. And he’s apparently doing so at substantial risk to his own standing, because while bickering, name-calling and kicking-and-screaming disagreement is all the rage every else in the District of Columbia, dissent does not go over well at the marble Politburo on Constitution Avenue NW. Read more »
It seems Bernanke may not quite have all of his ducks in a row.
Of the majority favoring the programs, officials were about evenly split between those who thought the Fed would be likely to end the bond buying by “sometime around the middle of 2013″ and those who thought the central bank would want to continue beyond then, the minutes said. Some saw the programs continuing until year-end.
Some wanted to stop buying bonds four Mondays ago. That prospect did not make the boys and girls on the floor very happy. Read more »
Ben Bernanke’s a hard one to shop for. But his underlings are dropping some clear hints. And he’s OK with the fact that you’ve already missed Hannukah, as long as it gets to him sometime next year. Read more »