Op-Ed Contributor - The Great Preventer - NYTimes.com:
Interesting piece. I am not sure whether stating that a person was actively complicit in the creation of a disaster and then participated in the rescue from the abyss is the soundest argument to make the case for them to be REWARDED. The opposing piece by Anna Jacobson Schwartz seems more coherently argumented.
Precisely with respect to BICs, when Roubini recalls that "The Fed even committed to purchasing up to $1.7 trillion of Treasury bonds, mortgage-backed securities and agency debt to reduce market rates." it once more makes me thing how much most cost-efficiently the fed could have controlled long term rates with interest rate BICs that replicate the whole curve.
I argue that the Fed making markets on interest rate BICs should be a major aspect of needed reforms at the Fed. Indeed in the 2003-2006 period, the fed had a hard time curbing the speculative bubble in the real estate market because acting only on overnight lending rates, it could not control long term rates that determine mortgage rates.
Showing posts with label Fed Policy. Show all posts
Showing posts with label Fed Policy. Show all posts
Sunday, July 26, 2009
Thursday, March 19, 2009
Fed Will Inject $1 Trillion More Into the Economy - NYTimes.com
Fed Will Inject $1 Trillion More Into the Economy - NYTimes.com
Not bad. But I think a but in a more structurally efficient way, the fed would expend less and achieve the goal of curbing long term rates if it made markets on overnight functional notionals BICs-FRAs along the term structure. Since this would recompose into long term bonds without immediately disbursing the cash needed to purchase long term bonds, it would use less capital.
In 2005 when the fed was desperately trying to raise long term rates to dampen speculation on mortgages, but considering it prohibitively expensive to get into the business of selling long term bonds, I volunteered a piece to the NYT and WSJ explaining how BICs might help do this efficiently. No one was interested.
Still, policy makers have not figured this one out...What else can I do?
Not bad. But I think a but in a more structurally efficient way, the fed would expend less and achieve the goal of curbing long term rates if it made markets on overnight functional notionals BICs-FRAs along the term structure. Since this would recompose into long term bonds without immediately disbursing the cash needed to purchase long term bonds, it would use less capital.
In 2005 when the fed was desperately trying to raise long term rates to dampen speculation on mortgages, but considering it prohibitively expensive to get into the business of selling long term bonds, I volunteered a piece to the NYT and WSJ explaining how BICs might help do this efficiently. No one was interested.
Still, policy makers have not figured this one out...What else can I do?
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