Tuesday , June 15 2021
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Tag Archives: Banking

Why won’t banks take your money?

 Banks to Companies: No More Deposits, Please, says the puzzling headline at WSJ. Why would bankers not want to take any amount of deposits, park them in reserves at the Fed or short term Treasury bills, charge fees and a slight interest spread, and sign up for an early tee-time at the local golf club? Sure "net interest margin" or other metrics might not look good, but money is money and more money is more money. The answer: Top of mind for many big banks is a rule...

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A letter to Yellen

Secretary of the Treasury, and ex Federal Reserve Chair Janet Yellen recently hosted an important meeting of the Financial Stability Oversight Council.  This is the highest level body overseeing financial regulation in the US. It matters. Her remarks start smoothly but critically, as one expects of a habitually well-prepared pro. A lot went wrong last year, from the treasury markets to another mutual fund bailout, and so forth. Bravo, it is time to get past celebrating how another...

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Unintended consequences

The Dec 14 Wall Street Journal amplifies my warnings on the movement to de-fund fossil fuels by financial regulation, citing "climate risks." "The Senate Democrats’ Special Committee on the Climate Crisis recently issued a report detailing how the Fed and eight other regulatory agencies should penalize investment in fossil fuels and promote green energy. They claim financial institutions are underpricing the risk that carbon-intensive assets will become “stranded.”Mind you, their...

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CBDC in EU

I wrote an oped for Il Sole 24 Ore on central bank digital currency, as part of a series they are doing. It's here in their premium edition (gated) here on their blog, in Italian on top and English below. Thanks much to Luciano Somoza and Tammaro Terracciano for translation and inspiring the project.THE DIGITAL EURO IS A THREAT TO BANKS AND GOVERNMENTS. AND THAT’S OK. A central bank digital currency (CBDC) is in principle a very good idea. It offers the possibility of very low-cost...

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OECD talk — rebuilding institutions in the wake of Covid-19

Friday morning I had the pleasure of participating in a session at the OECD, as part of their program on Confronting Planetary Emergencies - Solving Human Problems. I had the tough job of following brilliant remarks by Acting CEA chair Tyler Goodspeed and Ken Rogoff, and discussing great questions all starting at 5 AM. FYI here is the text of my prepared remarks. My focus is how to rebuild the competence of our institutions, which failed dismally in this crisis. Covid and BeyondJohn...

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Debt podcast and reconciliation

 The Grumpy Economist podcast is back, with some thought on the debt issues from my last posts here and here.David Andofatto had some final thoughts at macro mania, with which I mostly agree. Yes a twitter/blog debate in macroeconomics produces agreement! Central points: 1) For these purposes a large sharp inflation and a default are not much different. In fact, the event I have in mind is most likely an inflation, as the US is likely to choose inflation over default. I don't...

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Fintech in chains

"Fintech can come out of the shadows" is the title that Wall Street Journal editors gave to  Brian Brooks and Charles Calomiris' oped last week. I have not in a long time seen a title that more utterly contradicts the content of the essay.  For what they advocate is exactly the opposite: Fintech in chains, hemmed in by  the sort of regulatory stranglehold that fintech was created to escape. What is fintech? Basically companies that offer  services—consumer loans,...

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Strategies for Monetary Policy

Strategies for Monetary Policy is a new book from the Hoover Press based on the conference by that name John Taylor and I ran last May. (John Taylor gets most of the credit.) This year's conference is sadly postponed due to Covid-19. We'll have lots to talk about May 2021.At that link, you can see the table of contents and read Chapter pdfs for free. You can buy the book for $14.95 or get a free ebook.The conference program and videos are still up.Much of the conference was about the...

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The fire in Treasurys

Just where was the fire that caused the Federal Reserve to buy $1.3 trillion of treasury debt in a month -- financing all treasury sales and then some? I've been puzzling about this question in a few posts, most recently here. Commenter "unknown" impolitely but usefully points me to a nice paper by Andreas Schrimpf, Hyun Song Shin and Vladyslav Sushko that explains some market mechanics. I am still not persuaded that these gyrations motivate or justify the Fed buying these or...

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Treasury Liquidity

So just what was the "disruption" in the Treasury market that so spooked the Fed, that now the Fed is buying more than the Treasury is selling?A commenter on my last post on corporate bonds points to Treasury Market Liquidity during the COVID-19 Crisis by Michael Fleming and Francisco Ruela at the NY Fed, April 17Michael and Francisco nicely show us the facts. They make no editorial comment at all, except perhaps in the figure titles, so my questions about just how...

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