Federal Reserve

Chancellor: The carry trade that followed Lehman

14 Sep 2018

The subprime crisis was born from yield-chasing in the Greenspan easy-money era. Even lower interest rates since the Lehman bust revived the global carry trade. Another maelstrom will be hard to avoid.

Chancellor: “Haves” enriched most from Lehman bust

13 Sep 2018

Ultralow interest rates after the crisis may have lifted many boats, but the yachts of the wealthiest have been buoyed above all. Wall Street and the CEO class particularly benefited. This has come at the expense of the less fortunate, who are making their displeasure known.

Chancellor: The legacy of ultralow interest rates

10 Sep 2018

This first in a series of "Ten Years After" essays argues the bold monetary experiment that followed Lehman’s demise unleashed speculative manias, carry trades, populism born of inequality, capital misallocation and a China bubble that pose grave threats to the financial system.

As Trump goes low, Fed goes high

24 Aug 2018

Jerome Powell sees little risk of economic overheating, indicating the Fed will raise rates again next month. The U.S. central bank chief’s first public comments since the U.S. president said he wasn’t thrilled with Powell’s policies suggest he’s largely impervious to Trump.

Fed vice chair deserves to be top global bank cop

23 Aug 2018

Allies of President Donald Trump have slammed the Financial Stability Board, but Randal Quarles is a strong supporter. Putting the U.S. central banker in charge of the body that oversees financial regulation when Mark Carney steps down would help maintain global rules.

Summer lulls offer false sense of security

10 Aug 2018

That, at least, is the lesson of August 2008. A complacent Citi exec claimed the lender had more than enough capital, Merrill handed one banker a $40 mln guarantee, GM’s CEO was talking up its prospects - and the Fed was worried about inflation. The hubris didn’t last long.

Powell is ideal Fed chief for Trumpian times

20 Jul 2018

The U.S. president’s criticism of interest-rate hikes is a challenge to the Federal Reserve’s independence - but it shouldn’t trouble investors. Chair Jerome Powell is politically savvy and has earned bipartisan praise. Not being an econo-wonk like his predecessor probably helps.

Fedspeak puts America’s best bank in a quandary

18 Jul 2018

Supervision boss Randy Quarles reckons the biggest straight-up U.S. lenders need fewer regulatory constraints than the likes of JPMorgan. U.S. Bancorp, which again earned industry-leading returns last quarter, would benefit, but could also face M&A pressure it would rather avoid.

Powell could help stiffen Congress’ spine on trade

17 Jul 2018

The Fed chief told lawmakers U.S. tariffs could threaten wage growth, but said it was unpredictable. Trade policy isn’t the Fed’s remit. Politicians are, though, worried at the early effects – yet they don’t want to anger Trump. A stronger steer from Powell might tip the balance.

Fed lets Goldman, Morgan Stanley off lightly

29 Jun 2018

Neither firm can boost buybacks or dividends after their leverage ratio fell below the stress-test minimum. A one-time hit from last year’s tax changes caused it. But Amex, JPMorgan and others handled that smoothly. The two Wall Street banks are lucky the Fed didn’t flunk them.

Failed exam suggests deeper U.S. cuts at Deutsche

28 Jun 2018

The German lender was the only bank to flunk the Fed’s annual stress test, adding to its U.S. regulatory woes. Given compliance costs, the result could force new boss Christian Sewing to shrink the bank’s American presence even further. Wall Street titans will strut higher still.

People’s Fed will provide armor in economic dip

21 Jun 2018

Chairman Jay Powell says he’ll speak in plain English about what the U.S. central bank does. He also admits the Fed doesn’t have all the answers. Demystifying it should strengthen its credibility. That will be handy when the economy turns and politicians are pointing fingers.

Fed steps closer to horns of interest-rate dilemma

13 Jun 2018

The U.S. central bank raised rates again as expected. Low unemployment and building inflation will force the Fed to consider how high it should go to prevent overheating – a shift from worrying about keeping rates low to support the economy. Trade wars are another complication.

Penalty box hastens Deutsche’s Wall Street retreat

31 May 2018

Being branded “troubled” by the Federal Reserve, as the WSJ reported, is hardly the first stateside warning for the German lender. New CEO Christian Sewing already plans to slim the American business. Worried U.S. supervisors will give him a greater sense of urgency.

Volcker tweak reveals Powell Fed’s cautious streak

30 May 2018

Banks hoping for an overhaul of the prop-trading ban will be disappointed by the U.S. central bank’s modest revisions. Compliance costs may fall but Jerome Powell’s team doesn’t want Wall Street to go back to its freewheeling ways. It rightly retains distaste for big risk-taking.

The Exchange: Putting limits on central-bank power

4 May 2018

Central bankers emerged from the financial crisis with more clout than ever before. Can this be reconciled with democratic legitimacy? Former Bank of England Deputy Governor Paul Tucker explains why monetary authorities have become “overmighty citizens”, and how to rein them in.

U.S. bond yields may be throwing investors a curve

23 Apr 2018

The difference between short- and long-term Treasury rates is the smallest since before the financial crisis, raising fears of a coming recession. Yet the yield curve is a flawed warning, sometimes flashing years before a downturn hits. There are far better things to worry about.

Trump’s Fed is more rerun than reality TV

16 Apr 2018

Nominating economist and Pimco adviser Richard Clarida as vice chair and regulator Michelle Bowman to the board are predictable moves. With the central bank, the U.S. president has shunned the turmoil sown elsewhere in government. For investors, that's comforting continuity.

New York Fed boss starts with point to prove

3 Apr 2018

A search billed as highly inclusive ended up picking John Williams, a white, fifty-something insider, to run the key Fed district. He may have been the best candidate, but on top of managing markets and regulating Wall Street he’ll be on the spot on diversity from day one, too.

New Fed chief leaves more questions than answers

21 Mar 2018

Jay Powell sold a rate hike and hawkish economic outlook with dovish language at his first policy meeting. The central bank is divided over how low unemployment can go and whether tax cuts will spark inflation. The chair’s confident showing may buy time to resolve the tensions.