Screw Not With The Federal Reserve, Mere Mortals

Respect the J-Yel.

When Richmond Fed President Jeffrey Lacker resigned suddenly and in disgrace Tuesday, it seemed like a perfect time for anyone with an axe to grind to take aim at the Federal Reserve. Some of this was warranted. Some seemed a bit gleeful.


Here was the front-page headline at the ordinarily stolid Wall Street Journal:

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Wham! Take that, the Fed's credibility. But if you come at the king, you best not miss. On Wednesday, the Fed reminded everyone who's boss:

Stocks soared in trading on Wednesday before tumbling to end the day in negative territory. All three indexes tanked following the release of the Federal Reserve's minutes from the March monetary policy meeting as the Fed indicated that it would look into reducing its balance sheet by the end of the year.

In case you didn't get the message from the part about the Fed winding down its balance sheet – hanging $4.5 trillion of downward pressure over financial assets – the minutes also noted that a few officials regarded equity prices as “quite high.”

OK, so these minutes date back to March and have essentially nothing to do with the recent revelation that Lacker took part in the leak of confidential information that has bedeviled the Fed since it became public in 2012. But it's the symbolic importance that counts here. Janet Yellen works in mysterious ways.

STOCKS TUMBLE INTO THE RED: Here's what you need to know [Business Insider]
U.S. Stocks Fall With Dollar as Treasuries Rise [Bloomberg]