Monday, October 25, 2010

Richard Alford: Selective Mission Fed the - take roles means too do none of these wells

By Richard Alford, former economist of the Federal Reserve in New York. Since then, he has worked in the financial industry as an economist of floor trading and a strategist both sale and buy side.

In the 1960s and 1970s, an arm of the u.s. Government destroyed villages in the Viet Nam to save their. Fifty years later, it appears as an arm of the Bush economy / supports a TBTF financial institution only to prosecute for misrepresenting loans that he packed.However, because the institution is too big to fail, the same arm of the Government will continue to fund to close rate zero in the hope it generates levels of performance that attract more capital and loans plus.Il is convinced that the abundant access and cheap loans is Royal to salvation, even if it appears that the real reason this Bank, like others, cannot do more willing isn't lack of low cost money, but lack of demand from borrowers.

The Fed has really put themselves in a strange situation.Once again, the US Federal Reserve has sought to continue the inflation only targeting despite its dual legal to promote the stability of prices and the full justification for exclusive emphasis on inflation emploi.La mandate was that it might better achieve the stability of prices, that it would ensure the economic and financial stability. Now after back followed seeking to avoid the complexity of trying to balance the simultaneous pursuit of low inflation and employment reserve US Federal adopted also is a private investor issued financial assets, while preserving financial institutions over which it has prescribed liability exposures (on a fully guaranteed basis).

This will trigger inevitably more questions about the capacity and motivation of the Federal Reserve continues what will be seen as a mandate from Hydra Head: inflation, full employment, the support of the institutions of the TBTF and maximize the return on portfolio (fiduciary liability for taxpayers) if the modification of the policy in response to an increase in unemployment raises questions about the commitment of the Fed to the stability of prices, which will be an investor make reputation perceived as impartial regulator of financial markets and institutions as well as the implementer of the monetary policy itself? (See article from Bloomberg.)In addition, it will be considered like a shell game: making taxpayers together at the expense of Bank of America and possibly other only to subsidize capital reconstruction of these institutions by super-low interest rates of penalising savers and investors focused on performance and encouraging speculation.

The US Federal Reserve never should have played the role it has done in the acquisition of JP Morgan, bear or AIG, de facto nationalization which all led to the creation of entities three Maiden Lane, which investment off the coast of balance sheet funding vehicles, conveniently under the Federal Reserve.Instead of this rescue operations should were funded by the Treasury Board, but who would have exposed these go to constitutionally responsible for budgetary funding and presentations to much greater surveillance publique.La fed ought to limit its role to loans temporarily entities illiquides but solvents and bridge financing of TB requested permission to liquidate or rearrange insolvent systemically important companies: Fannie and Freddie model.

Given the existence of Maiden Lane vehicles and the absence of all monies available for the Treasury to purchase reserve, what can be done? "James McAndews, is research at the Federal Reserve Bank of New York speaking in Boston on a slightly different topic, proposed a solution. Quoted in the Wall Street Journal blog:

The Fed is winning and returning to the consolidated revenue fund an enormous there is a case that these extraordinary earnings today, some people could be cancelled.

McAndrews spoke to next part of the current Fed win (approximately 60 billion dollars CDA) to mitigate potential future losses account required size, composition and duration of the portfolio of the Federal Reserve américaine.Cependant, amounts could just as easily be used to allow the Fed to accumulate a surplus of capital allow to write the value of the Maiden Lane entities up to zero and "gift" to the Treasury Board.

Track the girl entities are currently valued at about 65 billion dollars.Questions legal and accounting may be insurmountable for mere mortals, but not the US Federal Reserve.The US Federal Reserve "sold" the acquisition of a 79.9% stake in AIG as a loan.It "sold" the acquisition of the assets in the way of the girl as a loan.The Fed is also good for the imaginative structure such as a house in the street.

It would be a win, win, win, win, win.

Reserve US Federal prevail as it would avoid the possibility of perceived conflict of interest.

Markets prevail as the clouds over the Central Bank and regulatory policy would be lifted.

Society and democracy prevail as intrinsically political would be educated by individuals in the offices of the policies.

Treasury prevail big.Les entities Maiden Lane could be met with Geithner was largely responsible for their création.Il loved then them and he likes them given maintenant.étant that they would be gifted (zero cost) Geithner's Treasury could put in place PPIP 2.0: brand on the market: declare immediate profits and take credit for reducing the net debt.

From a perspective of taxpayer, it would be a set of shell sum nulle.Le "don" would was paid for by less than the consolidated revenue fund contributions from Fed, but taxpayers gain from the sale of assets in Maiden Lane entities Treasury or the creation of the Executive and legislative powers where they always belonged.

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