Federal Reserve

Virus forces Fed to clean up its own junk

13 Apr 2020

The U.S. central bank said it will buy bonds of some firms that lose investment-grade ratings. It’s a good compromise to avoid a high-yield market crunch. But companies binged on debt partly because of loose monetary policy. The Fed now risks distorting the price of credit.

Fed bridges over economic chasm lack destination

9 Apr 2020

With more than 15 mln unemployment claims in three weeks, the U.S. central bank is focused on the present. The latest expansion of its debt-buying capacity to $2.3 trln is a lifeline for many. It’s also probably not the last. There will inevitably be tolls to pay later.

Wells Fargo relief is one piece of bailout jigsaw

8 Apr 2020

The Fed is easing its cap on the bank’s growth so it can funnel more rescue loans to small U.S. businesses. It will help a few of the up to 30 million firms in dire Covid-19 straits, but there are plenty of other glitches to fix in the $350 billion-plus federal guarantee program.

Global central bank stimulus presages gold surge

31 Mar 2020

Worldwide central banks have maxed out monetary stimulus. That makes all safe havens less safe except one. Gold’s growing supply scarcity and rising production costs make it solider than bitcoin, real estate or stocks. The 19th century asset is having a renaissance in the 21st.

Fed’s virus response delivers its everyman moment

30 Mar 2020

The U.S. central bank was criticized for its 2008 financial crisis response that aided Wall Street. The current health emergency is spurring the Fed to help Main Street through small business loans. The move helps counter its elitist image and bolsters its political clout.

Fed’s ultra-loose efforts will cast long shadow

23 Mar 2020

The U.S. lender of last resort is living up to its name. The latest extraordinary measures are needed but, like the response to the last crisis, may leave the system vulnerable to further debt buildup and asset bubbles. After the storm, policymakers will need a serious rethink.

Investors have bigger worries than GDP’s nosedive

23 Mar 2020

That U.S. economic output will plunge in the second quarter is clear. Whether it drops up to the 50% evoked by St. Louis Fed boss James Bullard is debatable. What matters more is how long virus shutdowns last and whether there are worse scenarios for investors to anticipate.

Super-stimulus shows what Fed was made for

23 Mar 2020

As Covid-19 decimates the economy, the U.S. central bank pledged to buy unlimited Treasury and mortgage securities as needed, and backstop corporate credit. The resulting moral hazard is tomorrow’s problem. Combatting deflation and unemployment are why the Fed was created.

China’s rate caution is conscious uncoupling

23 Mar 2020

The central bank is holding lending benchmarks steady as global peers slash. Bad debts and capital flight risk make big fiscal and monetary moves more dangerous than in 2009. That pushes the burden for stimulus to the government. Either way, structural imbalances will get exacerbated.

Wall Street has $1.4 trln chance to amend for 2008

17 Mar 2020

That’s what big U.S. banks could lend using their excess capital. Tapping into what they’ve set aside to help in a crisis would yield more. Financial returns might not be great, but using their strength to bail out taxpayers in need would be an apt reversal of the last meltdown.

Commercial paper jam casts less menacing shadow

17 Mar 2020

The Federal Reserve is intervening in the $1 trln market that companies depend on for short-term funding. That should calm nervous investors and reduce credit line drawdowns that could stress banks. The central bank did the same in 2008. This fix is easier to execute.

Fed will struggle to open discount window wide

16 Mar 2020

The eight biggest U.S. lenders are tapping the central bank’s emergency facility to help reduce its stigma. Ones that used the program during the financial crisis were publicly shamed. The likes of JPMorgan are setting a good example, but may not persuade smaller peers to follow.

Fed arsenal shows up White House peashooter

15 Mar 2020

The U.S. central bank slashed interest rates, increased government bond buying and made it easier for foreign firms to get dollars. It’s an impressive response to the Covid-19 crisis. But without fiscal stimulus or adequate public health remedies, the Fed can only do so much.

Financial mayhem needn’t become pandemic

12 Mar 2020

The Fed opened the taps on $1.5 trln of liquidity to smooth Treasury trading. Stocks tumbled again as companies like Boeing drew on debt. And policy gaffes from Washington and Frankfurt don’t help. But there’s no reason, yet, for the health crisis to create a financial one.

Viewsroom: Fear factor

5 Mar 2020

U.S. Fed Chairman Jerome Powell surprised markets with a rate cut ahead of schedule. Democratic presidential contender Joe Biden unexpectedly won the most states on Super Tuesday. Covid-19 may show up in China M&A clauses. The coronavirus is inspiring flights to safety.

Fed playbook will need a new page on zero rates

5 Mar 2020

Chair Jay Powell is likely to follow up this week’s emergency rate cut with more. It’s a case of when, not if, the U.S. central bank will revisit 0%. There are tactics it can try before going negative like euro zone and Japanese peers. The problem, though, is diminishing returns.

Fed easing shocks more than it awes

3 Mar 2020

U.S. central bank boss Jay Powell cut rates by half a percentage point because of economic risks from the coronavirus. Easing from the provider of global financial liquidity sets the scene for others to follow. The impact would have been bigger had G7 peers acted simultaneously.

Bloomberg throws Wall Street under campaign bus

18 Feb 2020

The financial-data mogul’s plan to curb his top clients if he becomes U.S. president preempts criticism he’s too close to them, and his status makes ideas like a transaction tax credible. But Bloomberg probably won’t push it beyond the minimum needed for Democratic acceptance.

Trump’s could-be-worse Fed pick could get worse

13 Feb 2020

Judy Shelton said many of the right things in her Senate hearing, defending central bank independence and downplaying earlier fringe views. Her White House ties would be manageable as just one of several board members. That changes if chair Jay Powell’s role comes up for grabs.

The Exchange: Anthony Scaramucci

10 Feb 2020

We last spoke to the founder of SkyBridge Capital a week before Donald Trump won the U.S. presidential election. When asked if he would take a White House job if Trump won, he said no – unless it was Ambassador to the Vatican. So, when in Rome, Rob Cox sat down with “The Mooch.”