Our experiment in blogging began four years ago, when we launched Liberty Street Economics. Now, with more than 600 posts published, the blog platform has become a central way for us to share our research with a wide audience. To further expand access to the blog, we’re excited to bring readers a new option for keeping up with our work—the Economic Research Tracker for Apple iPad.FRBNY — Liberty Street Economics
This easy-to-use app, which is available for free download in the App Store ®, contains the full catalogue of Liberty Street Economics blog posts, as well as access to our economists’ profiles, which provide more detail about their research interests and publications. The Economic Research Tracker is also customizable, allowing users to filter blog posts by topic—such as housing, labor economics, monetary policy, and regional analysis—or by author. Finally, the app is also usable offline, so readers can access content after disconnecting from the internet, for example, when they are commuting.
The Wall Street Journal has published an important account of a behind-the-scenes power struggle at the Federal Reserve over authority for regulation. The result that the New York Fed has had significant amounts of its authority shifted to the Board of Governors in Washington, DC. This is a major win for Fed governor Dan Tarullo, who has emerged as one of the toughest critics of big financial firms at the Fed in the wake of the crisis. It is also a loss for the banks, since the New York Fed is widely recognized as close to Wall Street. Moreover, the Board of Governors is more accountable to citizens (its governors are Federal employees, the Board of Governors is subject to FOIA, although confidential supervisory of all financial regulators is exempt), while the regional Feds can best be thought of as public/private partnerships with weak governance structures,* so this move in theory is also a gain in terms of accountability to the public. However, since Greenspan holdover, deregulation enthusiast and Dodd Frank opponent Scott Alvarez remains as the general counsel of the Board of Governors, it’s unlikely that any newfound serious intent by the Board of Governors will go all that far in practice, given the powerful role that Alvarez exerts over matters regulatory.
Moreover, as proof of how secretive the Fed is and how voters are kept in the dark, this change was designed five years ago and has been in the process of implementation since then. The consequence is that, as the Journal points out, the Congressional committees responsible for bank regulator oversight have wound up directing questions to the New York Fed, and in particular its president Bill Dudley, that should more properly have been aimed at the Board of Governors.Snake pit.
One is tempted to say that the financial sector does not need to capture the New York Fed. It already “owns” it.
It is important to distinguish the Fed Board of Governors and the Washington staff from the New York Fed. The twelve regional Feds are separate entities, and the most important is the one in New York because it is at the epicenter of the industry. The regional Feds are not governmental entities. In fact they are not “regulators” in the sense of the SEC or the Food and Drug Administration. The regional Feds do not report to a government official or agency. Majorities of their boards are chosen by the member banks themselves. Here is how the New York Fed Board breaks down.
Of course, the practitioner members have disproportional influence because of their superior information and expertise. And the business representatives must be sympathetic to the banks which elected them. It is not difficult to imagine how debates inside the New York Fed board play out.
- One third of the members are bankers. For example, Jamie Dimon was a board member from January 2007 through 2012, encompassing both the financial crisis and the events reported by This American Life.
- One third of the members are representatives of business elected by member banks (the founder of Silver Lake Partners – a private equity firm - and the Chairmen/CEOs of Honeywell and Macys).
- One third of the members are appointed by the Federal Reserve Board (the Presidents of the Metropolitan Museum of Art and Rockefeller University the founder of the Freelancers Union).
Just when it seemed one could no longer be shocked by the corruption, hubris and lack of accountability in the American financial system, along comes yesterday’s release of the Federal Reserve’s minutes for the October 29-30 meeting of its Federal Open Market Committee (FOMC).
While mainstream media focuses on what the minutes revealed about when the Fed might begin to reduce its monthly $85 billion in bond purchases, receiving scant attention is a brazen power grab boldly stated on page two of the eleven pages of minutes.
Back on October 31, wire services reported that the temporary dollar and foreign currency swap lines that had been put in place between central banks on a temporary basis during the financial crisis had been turned into standing arrangements.
The Associated Press explained the action as follows: “Six of the world’s leading central banks, including the U.S. Federal Reserve, say they will provide each other with ready supplies of their currencies on a standing basis, extending arrangements set up to steady the global financial system during post-2007 turbulence.”
In other words, without public deliberations, an action that was adopted as a temporary, emergency operation, now had become a permanent part of world finance – on the basis of minutes and details yet to be seen by Congress or the general public…..It gets worse from here.
The New York Fed has long collected market information from its primary dealer trading counterparts and released these data in aggregated form to the public. Until recently, such data have only been available for broad categories of securities (for example, Treasury bills as a group) and not for specific securities. In April 2013, the Fed began releasing data on some specific Treasury issues, allowing for a more refined understanding of market conditions and dealer behavior.FRBNY — Liberty Street
Read it at Zero Hedge
The last time the Fed tried to dump Maiden Lane 2 assets via a public auction in a BWIC manner, it nearly crashed the credit market. This time, the FRBNY, headed by one ex-Goldman Sachs alum Bill Dudley, has decided to go back to its shady, opaque ways, and transact in private, with no clear indication of the actual bidding process or transaction terms, and sell $6.2 billion in Maiden Lane 2 "assets" to, wait for it, Goldman Sachs, the same firm that would benefit in the first place if AIG's assets imploded (remember all those CDS it held on AIG which supposedly prevented it from losing money if AIG went bankrupt?). One wonders: does Goldman have a put option on the ML2 portfolio if the market experiences a sudden and totally impossible downtick some day? But all is well - we have assurance from the Fed that the sale happened in a "competitive process." Luckily, that takes care of any appearance of impropriety.
