36 Hours of Alarm and Action as Crisis Spiraled
stockbee — ... out cash. It is frightened investors protecting themselves by buying credit-default swaps — a financial insurance policy against potential bankruptcy — at prices 30 times what they normally would pay. It was this 36-hour period two weeks ago — from the morning of Wednesday, Sept. 17, to the afternoon of Thursday, Sept. 18 — that spooked policy makers by opening fissures in the worldwide financial system. In their rush to do something, and do it fast, the Federal Reserve chairman, Ben S. ...

NYTimes: As Credit Crisis Spiraled, Alarm Led to Action
Fund My Mutual Fund — ... plunge of stocks is obvious to all. The credit crisis has played out in places most people can’t see. It’s banks refusing to lend to other banks — even though that is one of the most essential functions of the banking system. It’s a loss of confidence in seemingly healthy institutions like Morgan Stanley and Goldman — both of which reported profits even as the pressure was mounting. It is panicked hedge funds pulling out cash. In their rush to do something, and do it fast, the Federal Reserve chairman, Ben S. ...

Coordinated rate cut plus In praise of Bernanke
FinanceProfessor.com — ... Included in the move to cut rates were the Federal Reserve, the Bank of England and the ...

Global rate cuts have arrived
Finance Trends Matter — ... cuts that so many people were looking for have arrived. More on that from the New York Times: "Central banks around the world cut short-term interest rates by up to half a percent on Wednesday after investors across Asia and Europe unleashed waves of sell orders onto already depressed stock exchanges. The Federal Reserve, the European Central Bank ...

The new Obama economic plans
Marginal Revolution — ... — direct the Treasury and the Federal Reserve to create a temporary facility for loans to state and local governments, similar to the Fed’s new arrangement to loan corporations money by buying their ...

Alan the Penitent (by Russell Roberts)
Cafe Hayek — ... , the former Federal Reserve chairman once considered the infallible maestro of the financial system, admitted on Thursday that he ???made a mistake??? in trusting that free markets could regulate themselves without government oversight. ...

AIG (AIG) Needing more of Your Grandkids Money
Fund My Mutual Fund — ... The Treasury Department and the Federal Reserve were near a deal to invest another $40 billion into the insurance giant, these people said. The new cash, which would be part of a huge restructuring of A.I.G.’s debt, comes after the government made an $85 billion emergency line of credit available in September to keep it from toppling and another $38 billion line when it became clear that the original amount was not enough. The money would come from the $700 ...

The More Things Change, The More They Remain The Same
The Aleph Blog — ... “All of these ‘rescues’ are a disaster for the taxpayer, for the financial markets and also for the Federal Reserve System as an organization. Geithner, in our view, deserves retirement, not promotion.” ...

New York Times: A Rising Dollar Lifts the U.S. But Adds to the Crisis Abroad
Fund My Mutual Fund — ... Because worries are deeper nearly everywhere else, the United States and the dollar have essentially benefited from the worldwide panic. In the last year, the dollar has risen 13 percent against major foreign currencies after adjusting for inflation, according to Federal Reserve data. “It’s a huge safe haven effect,” said William R. Cline, a senior fellow at the Peterson Institute for International Economics in Washington. “The basic assumption that people are making is that the U.S. government will never ...

How I Became a Subprime Borrower and Blew Myself Up
Yahoo! Finance: Tech Ticker — ... other Americans are now intimately familiar with. Andrews doesn't blame anyone else, including his mortgage broker (startling and refreshing). He doesn't curse the economy.  And he speaks openly and forthrightly about an all-too-familiar topic that most people are embarrassed to talk about. Don't miss it. If there was anybody who should have avoided the mortgage catastrophe, it was I. As an economics reporter for The New York Times, I have been the paper’s chief eyes and ears on the Federal Reserve for the past six years. I watched ...

NYT Reporter: My Subprime Borrowing Nightmare
Yahoo! Finance: Tech Ticker — ... other Americans are now intimately familiar with. Andrews doesn't blame anyone else, including his mortgage broker (startling and refreshing). He doesn't curse the economy.  And he speaks openly and forthrightly about an all-too-familiar topic that most people are embarrassed to talk about. Don't miss it. If there was anybody who should have avoided the mortgage catastrophe, it was I. As an economics reporter for The New York Times, I have been the paper’s chief eyes and ears on the Federal Reserve for the past six years. I watched ...

NYT: Emails Show Federal Reserve Applied Pressure to Bank of America (BAC) Executives
Fund My Mutual Fund — ... of sympathy. For all these folks who think the rogue Federal Reserve is some impartial "independent body" enjoy the sausage. And this folks is only part of the reason we need to have an open, transparent, and audited Federal Reserve. Our fearless leaders in D.C. want to give this asleep at the wheel regulator even MORE power! That's what you get for missing the entire boat, and in fact contributing to it... rewarded! Via NYT E-mail messages from the Federal Reserve chairman Ben S. ...

Fed Orders CIT to Submit Capital Plan
DealBook — The U.S. Federal Reserve has ordered CIT Group , the cash-strapped corporate lender struggling to avoid bankruptcy, to submit a plan for raising capital and meeting debt obligations within 15 days. The order from the powerful regulator comes as CIT, which on Monday again warned it may seek bankruptcy protection if debt restructuring efforts fall through, scrambles to line up new financing. CIT’s shares climbed by as much as 19 percent after it announced Wednesday’s order on Thursday. CIT, which became a Fed-supervised bank holding company in December, agreed that ...

Bernanke, a Hero to His Own, Can't Shake Critics
DealBook — ... , chairman of the Federal Reserve , may have credibility in financial circles, but both he and the Fed as an institution have come under political fire from lawmakers in both parties over the handling of particular bailouts and the scope of the Fed’s power, The New York Times’s Edmund L. Andrews reported. As central bankers and economists from around the world gather on Thursday for the Fed’s annual retreat in Jackson Hole, Wyo., most are likely to welcome Mr. Bernanke as a conquering hero. In Washington and on Wall Street, it would be a surprise if ...

Fed Lifts Value of Bear Stearns, A.I.G. Assets
DealBook — The Federal Reserve on Friday lifted an estimate of the value of Bear Stearns and American International Group assets used to secure their rescue last year, potentially reducing losses to U.S. taxpayers, Reuters reported. The Fed said that a quarterly revaluation of the roughly $62 billion portfolio resulted in a net increase in fair value of $1.5 billion at the end of June. Fair value means an estimate of what the assets would fetch if sold in an orderly market on June 30. In addition, the Fed said that cash flow generated by the assets from A.I.G. during ...

Obama to Tap Bernanke for 2nd Term at Fed
DealBook — ... to a second term as chairman of the Federal Reserve , administration officials said. The announcement is a major victory for Mr. Bernanke, a Republican who was appointed by President ...

Bernanke Takes Capitol Hill, but Not Quite by Storm
DealBook — ... to a second term as the Federal Reserve ’s chairman was generally greeted with praise on Capitol Hill on Tuesday, but there are still a number of lawmakers on the left and the right who wonder whether Mr. Bernanke is the right person for the job. It is no surprise that his reappointment has led to such a diversity of reactions across political lines. The financial crisis forced Mr. Bernanke to invoke the extensive powers of the Fed and pump trillions of dollars into the monetary system. His choices over the last year will have a profound impact on the United States and its ...

Bernanke's Opportunity to Regain Some Luster
DealBook — ... is not exactly getting a reward for failure. Mr. Bernanke, the chairman of the Federal Reserve , is being renominated for a second term as the world’s most powerful central banker. He made one big mistake in his first term, but a bigger success is still possible. If that’s not forthcoming, there will be nothing rewarding about staying in office, Breakingviews writes. Mr. Bernanke’s greatest failure was intellectual. He did not comprehend the economic risks of modern financial practices. He supported the enthusiasm for financial deregulation and innovation shown by ...

Bernanke's Next Tasks Will Be Undoing His First
DealBook — As he looks forward to a second term as chairman of the Federal Reserve , Ben S. Bernanke ’s biggest challenge will be to undo much of what made him a hero during his first term, The New York Times’s Edmund L. Andrews reported. In nominating Mr. Bernanke on Tuesday, Mr. Obama praised the Fed chairman for his “bold action and out-of-the-box thinking,” saying it had helped avoid a repeat of the Great Depression. But most of those bold actions — lending hundreds of billions of dollars to banks and businesses, slashing overnight interest rates to nearly zero, having the ...

A.I.G. Stock Rises, and Many Ask Why
DealBook — ... want to get 5 percent back. They want to get the money back that they lost over the last year.” They look at a cratered stock like A.I.G. and think, “This is the place to do it,” he said. Taxpayers may take some comfort from the rise in A.I.G.’s stock, which means better returns on their involuntary investment. Even though the government owns most of A.I.G., however, the soaring value of its shares does not come close to matching the vast amount of credit it extended through the Federal Reserve and the ...

Federal Reserve Made $14 Billion on Turmoil Loans
DealBook — The Federal Reserve has made $14 billion in profits on loans made in the last two years, The Financial Times reported on Monday, citing officials close to the matter. The U.S. central bank also earned about $19 billion from interest and fees charged to institutions that tapped liquidity facilities during the global financial crisis, the report said. If the Fed had invested the same amounted loaned out in three-month Treasury bills since August 2007, it would have earned $5 billion in interest, the FT said. This estimate excludes company bailouts and purchases of long-term ...

Senator Dodd Goes to Bat for Carrington With Fed
DealBook — A letter from Sen. Christopher Dodd, D-Conn. to Federal Reserve chairman Ben Bernanke earlier this month took Fed employees by surprise, Forbes reported. In the letter, Sen. Dodd said mortgage servicers were concerned that the terms for the ...

U.S. Banks Need Bigger Capital Buffers, Greenspan Says
DealBook — Banks in the United States need higher capital than they currently have, Alan Greenspan, former chairman of the Federal Reserve told a Mumbai conference via satellite on Monday.“I think even in non-euphoria, non-crisis times, we need to have a larger buffer than we currently have,” he said. Mr. Greenspan, who stepped down as Fed chairman in 2006 after 18 years at the helm, said the considerable slack in the world economy suggested the global rate of inflation excluding food and fuel will go down until the early part of next year, Reuters reported. But the massive amounts of ...

After Fed Report, Shares Extend Rally to 4 Days
DealBook — The stock market extended its gains to a fourth day after the Federal Reserve said the U.S. economy was stabilizing. Industrial and financial stocks led the advance Wednesday, which lifted the Dow Jones industrial average 50 points by the closing bell. It had been up 80 points earlier in the day, The Associated Press reported. Stocks briefly surrendered their gains after the release of the Fed’s report on regional economies, which also found that consumer spending would rise but only because of car purchases linked to the government’s brief cash-for-clunkers program. The ...

Lehman Had to Die So Global Finance Could Live
DealBook — ... secretary at the time, and Ben Bernanke, the Federal Reserve chairman, to allow Lehman to go bust as the single biggest mistake of the crisis. Never mind that the two men have insisted ever since that they had no other option; surely, they could have created some options if they’d wanted to. Or so goes the conventional wisdom. Christine Lagarde, France’s finance minister, for instance, called the decision “horrendous” and a “genuine mistake.” According to David Wessel, author of a book about the crisis, “In Fed We Trust,” the head of the ...

Where Politics Don't Belong
DealBook — ... had an easier time getting back to profits. The Federal Reserve has been lending to banks at near-zero interest rates while paying higher interest on the reserves the banks hold at the Fed. “Too big to fail” policies mean that the large banks can raise money more cheaply because everyone knows they are safe counterparties. President Dwight D. Eisenhower warned of the birth of a military-industrial complex. Today we have a financial-regulatory complex, and it has meant a consolidation of power and privilege, Mr. Cowen says. We’ve created a class of politically protected “too ...

Ex-Bank of England Member 'Astounded' Lehman Wasn't Saved
DealBook — ... . The Federal Reserve put up $29 billion in March 2008 to underwrite JP organ Chase’s rescue of Bear Stearns, and was forced to step in again last September days after Lehman Brothers’ failure to prevent ...

A Tough Crowd on Wall Street
DealBook — ... Secretary Timothy F. Geithner, Paul A. Volcker and Mayor Michael R. Bloomberg, all seemed to agree needed to be a priority. The president also called, again, for “a systemic regulator” — someone who could monitor all financial institutions and be able to take action before one firm’s problems could infect the rest of the system. The Obama administration has said that the Federal Reserve should be in charge of such monitoring. As I spoke with chief executives when we left the auditorium, most said they agreed with the need for a systemic regulator. But, as with other power ...

Bernanke Speaks, and Markets Inch Higher
DealBook — For weeks, many of Wall Street’s hopeful voices have been calling the end of the recession. And when the Federal Reserve chairman, Ben S. Bernanke, said the same was “very likely” on Tuesday, his comment helped stock markets rise to highs for the year, The New York Times’s Jack Healy reported. The Dow Jones industrial average gained 56.61 points, or 0.59 percent, to close at 9,683.41, while the broader Standard & Poor’s 500-stock index was up 0.31 percent or 3.29 points, to 1,052.63. The Nasdaq was 0.52 percent, or 10.86 points, higher, at 2,102.64. Shares of basic-materials ...

Fed Chief Says Recession Is 'Very Likely Over'
DealBook — The Federal Reserve chairman, Ben S. Bernanke, said Tuesday that it was “very likely” that the recession had ended although he cautioned that it could be months before unemployment rates dropped significantly, The New York Times’s Stephen Labaton reported. “Even though from a technical perspective the recession is very likely over at this point, it’s still going to feel like a very weak economy for some time as many people will still find that their job security and their employment status is not what they wish it was,” Mr. Bernanke said in response to a question about ...

Shares Rise on Bets for Economic Rebound
DealBook — ... bit more to go.” Mr. Strazzullo said his firm was looking for benchmarks of 1,100 and 1,150 on the S.& P. 500 (it is now trading around 1,060) as moments to pause, take some profits and reassess whether the markets seem primed for more gains. It has been a good week for the bulls on Wall Street. A new report on industrial production showed that factories, mines and utilities increased their output for a second month in August, a sign that a recovery was under way. On Tuesday, the Federal Reserve chairman, Ben S. Bernanke, said that the recession was most likely over, though ...

After an 11-Month High, Markets Take a Breather
DealBook — ... yields below resistance levels will lead to lower prices as investors prepare for auctions, according to RBS Securities. The government plans to sell a record $112 billion in two-, five- and seven-year notes next week. The government has raised $1.2 trillion in new cash this year through sales of debt. ”Economic growth is slow, which justifies lower rates,” Lawrence Dyer, an interest-rate strategist in New York at HSBC Securities USA, one of 18 primary dealers that trade with the Federal Reserve , told Bloomberg. “There is still uncertainty about what 2010 will bring when the ...

Fed Considers Limits on Bank Pay
DealBook — The Federal Reserve is preparing what would be the most sweeping rules yet to regulate the pay at banks across the country, people close to the discussion said Friday. The rules would apply not just to the pay and bonuses of top executives but also to traders, loan officers and other employees, The New York Times’s Edmund L. Andrews reports. But rather than focusing on the specific amount employees are paid, Fed officials will be scrutinizing whether the structure of compensation, like the use of bonuses based on the volume of loan origination, encourages excessive ...

Congress May Force Bank of America to Share Details on Merrill
DealBook — ... While Bank of America acknowledged that Congress had the authority to disregard attorney-client privilege, the bank’s Washington law firm, WilmerHale, argued that that would set a bad precedent and referred Mr. Towns’s staff to the Attorney-Client Privilege Protection Act, which passed in the House but never became law. This summer, Mr. Towns’s committee held three prominent hearings about the merger, calling Mr. Lewis to testify as well as Ben S. Bernanke, the chairman of the Federal Reserve , and Henry M. Paulson Jr., the former secretary of the ...

Is the Recent Rally Irrational Exuberance?
DealBook — ... , President Obama said the most acute phase of the financial crisis was behind us. But he cautioned that the economy remained weak with rising unemployment, and that a variety of emergency government programs would continue to play a significant role in keeping the economy afloat. And Ben S. Bernanke, the chairman of the Federal Reserve , warned in remarks in Washington that while the United States was probably out of recession from a “technical perspective,” the economy would still “feel” very weak for some time. Despite this grim backdrop, Laszlo Birinyi, president of ...

Dodd Said to Push New Plan to Oversee Banks
DealBook — The senior Senate Democrat shepherding legislation to overhaul the nation’s financial system is planning to propose the merger of four bank agencies into one super-regulator, an idea that is significantly different from what President Obama envisions, The New York Times’s Stephen Labaton reported. The legislation being prepared by Senator Christopher J. Dodd of Connecticut, who heads the Senate Banking Committee, would also differ from the Obama plan by diminishing the role of the Federal Reserve as a systemwide overseer. Mr. Dodd’s plan is intended to be the starting point ...

Stocks Retreat From Recent Gains as Investors Cash in Profits
DealBook — ... ’s index of leading indicators improved for another month, bolstered by high supplier deliveries, improvements in credit markets and increases in building permits — all signals of an economy on the mend. But the index’s gain of 0.6 percent in August was lower than gains in the previous two months, and it disappointed forecasters, who had been expecting an increase of 0.7 percent. Now that a number of economists, along with Ben S. Bernanke, the Federal Reserve chairman, have said the recession is probably over, investors are focusing on the shape of the recovery. Some expect a ...

Stocks Resume Rally; Dollar at Year's Low
DealBook — The stock market’s rally goes on. After a day of losses, stocks rebounded on Tuesday as top officials of the Federal Reserve held a two-day meeting to discuss interest rates, inflation and the economy, The New York Times’s Jack Healy reported. With big banks and industrial companies taking the lead, the Dow Jones industrial average rose 51.01 points, or 0.5 percent, to close at 9,829.87. ...

Investors Retreat as Post-Fed Rally Quickly Fades
DealBook — Wall Street got an initial lift on Wednesday from the Federal Reserve ’s assessment that an economic recovery was under way, but the glow faded fast, dragging stocks to their second day of losses this week. The Dow Jones industrial average briefly crossed 9,900 points after the Fed released its statement at 2:15 p.m., but then a spree of selling pulled the market into the red, The New York Times’s Jack Healy reported. Financial firms led the way lower, and oil producers and industrial stocks slid as commodity prices dipped. While investors found few surprises in the Fed’s ...

Fed May Borrow From Money Market Funds, Report Says
DealBook — The U.S. Federal Reserve is studying the idea of borrowing from money market mutual funds as part of eventual steps to withdraw stimulus, The Financial Times reported. The Fed would borrow from the funds via reverse repurchase agreements involving some of the huge portfolio of mortgage-backed securities and U.S. Treasuries that it acquired as it fought the financial crisis, the newspaper reported, without citing any sources. This would drain liquidity from the financial system, helping to avoid a burst of inflation as the economy recovered. The Financial Times said Fed ...

Volcker Warns Obama Plan Leaves Opening for Bailouts
DealBook — Paul A. Volcker, a top White House economic adviser, said Thursday that the Obama administration’s proposed overhaul of financial rules would preserve the policy of “too big to fail” and could lead to future banking bailouts, The Associated Press reported. Mr. Volcker, a former Federal Reserve chairman, told Congress that by designating some companies as critical to the broader financial system, the administration’s plans would create an expectation that those companies enjoy government backing in tough times. That implies those financial companies “will be sheltered by access ...

Fed Reducing 2 Programs for Emergency Lending
DealBook — The Federal Reserve said on Thursday that it was further scaling back two emergency lending programs as the economy improved. The Fed will reduce the amount of money available to banks in short-term loans under a program called the Term Auction Facility. For 84-day loans, the Fed will provide a total of $50 billion in loans in October, and $25 billion each in November and December. For 28-day loans, the Fed will continue to make $75 billion available monthly through January. The Fed also is cutting back on a program in which investment firms can temporarily swap risky ...

American Debt Falls for First Time Since 1954
Fund My Mutual Fund — ... This week, the Federal Reserve published its quarterly report on debt levels in the economy. While Uncle Sam borrowed more, others borrowed less. The accompanying chart shows that total domestic debt — the amounts owed by individuals, governments and businesses — climbed just 3.7 percent from the second quarter of 2008 through the second quarter of this year. That is the smallest increase since the Fed started these calculations in the early 1950s. ...

Testing the Dexterity of a Crisis Manager
DealBook — ... outside the administration at a time when health care and foreign policy challenges increasingly command the headlines. But with the economy still hovering between recession and recovery, multiple tests of his judgment and political dexterity lie ahead. A Shaky Start Mr. Geithner made his professional reputation over two decades of behind-the-scenes government work that began in the Reagan-era Treasury Department. His profile rose considerably last fall as president of the New York Federal Reserve , when he joined President George W. Bush’s Treasury secretary, Henry M. Paulson ...

Lawmaker Proposes Hedge Fund Legislation
DealBook — ... to head off new regulation from Washington. Representatives of the industry’s main lobbying group met on Wednesday with the Treasury secretary, Timothy F. Geithner; Ben S. Bernanke, the chairman of the Federal Reserve ; and Mary L. Schapiro, chairwoman of the Securities and Exchange Commission, to lay out their views of President Obama’s sweeping package of reforms to the nation’s financial regulatory system. The U.S. House Financial Services Committee has scheduled an Oct. 6 hearing to discuss hedge fund regulation, among other issues. ...

Banking Panics: Déjà Vu All Over Again
DealBook — ... a place to save cash for a short time, earn interest and be assured that the cash is safe, cannot deposit in a regulated bank because the amount guaranteed by government deposit insurance is limited. Instead that firm will deposit the cash with a financial firm for a short time (typically overnight), earn interest and receive a kind of guarantee by accepting a bond as collateral for their deposit (usually a AAA-rated bond). This market is the sale and repurchase (“repo”) market. The Federal Reserve used to count repo, rightly, as money (in a monetary aggregate called M3) and ...

Too Much Trust, Too Little Worry
DealBook — ... risky and the new, driving up asset prices and driving down both prospective return and margin for error. In the years just prior to the onset of the crash in mid-2007, excessive trust manifested itself in many ways. Here are a few: Too much trust in markets: Free-market adherents believe in the markets’ ability to bring about optimal allocations of resources. But those solutions are arrived at only through lurching from one extreme to another, as experience now shows. The Greenspan Federal Reserve chose not to notice or do anything about bubbles that arose. Likewise, the ...

The Lehman Myth in the Financial Crisis
DealBook — ... bankruptcy. The most egregious problems with the conventional wisdom stem from the fact that the Lehman story is almost entirely mistaken. Start with the suggestion that Lehman shows the inadequacy of bankruptcy as a response to an investment bank’s financial distress. Whatever problems arose when Lehman filed for bankruptcy were not caused by the bankruptcy laws. They were caused instead by the government’s bait and switch. When it bailed out Bear Stearns in early 2008, the Federal Reserve and the Treasury Department strongly suggested they would rescue any ...

Stocks and Gold Gain as Investors Shun Dollar
DealBook — ... its deficit. The slide gained momentum after the Reserve Bank of Australia surprised investors Tuesday by raising interest rates, making Australia the first big economy to lift rates after the global financial crisis. Countries around the world — including the United States — trimmed interest rates to record lows as the credit crisis metastasized last year, in an emergency effort to stimulate the markets and keep lending from drying up. Although credit is flowing better now, the Federal Reserve has indicated that interest rates will hover near zero for some time. “The move ...

Paralysis in Debt Markets Deepens Credit Drought
DealBook — ... rescued the big names of American finance, it’s still hard to get a loan. But the problem isn’t just tight-fisted banks. The continued disarray in debt-securitization markets, which in recent years were the source of roughly 60 percent of all credit in the United States, is making loans scarce and threatening to slow the economic recovery, The New York Times’s Jenny Anderson writes. Many of these markets are operating only because the government is propping them up. But now the Federal Reserve has put these markets on notice that it plans to withdraw its support for them. ...

Next Global Crisis Won't Look Like the Last
DealBook — ... ). These companies alone represented over $12 trillion in financial assets. It is also still surprising how surprising these events were at the time. The first tremors of the crisis began in early 2007 with rising defaults and disruptions in the subprime mortgage market. Most market participants and observers, however, viewed those events as isolated from the broader financial markets and the “real economy” (including the Federal Reserve ’s chairman, ...

Dealing With the Shadow Banking System
DealBook — ... at Eton Park Capital Management. The origins of the recent financial crisis will no doubt be the subject of intense debate for generations, much as the origin of the Great Depression still generates debate to this day. Likewise, the wisdom of the government’s response will consume academic and policy debate for some time. Many commentators, somewhat unfairly, have criticized the government response as overly situational or ad hoc. What should be clear at this stage is that the Federal Reserve and other government regulators were significantly hamstrung in their efforts to ...

After Heartening Reports, Shares Rise
DealBook — ... Private Bank. “People who pulled back out of fear are starting to spend more. And we are seeing the evidence now. This confirms that the improvement is likely continuing.” Many are expecting a long, plodding recovery hampered by high unemployment and plenty of residual worry, but the figures suggested that the economy was nonetheless heading higher after a drastic contraction. And the president of the Richmond Federal Reserve , Jeffrey M. Lacker, who is a voting member of the Fed policy-making board, told reporters Thursday that the risk of a double-dip recession had ...

Fed Said to Eye Facility to Drain Reserves
DealBook — The Federal Reserve is contemplating accessing money market funds through clearing banks or the creation of a facility to drain cash added to the financial system, Bloomberg News reported, citing people familiar with the plans. With the Fed looking to remove some of the more than $1 trillion that was pumped into the U.S. economy, the methods under consideration could help conserve the capital of the 18 primary dealers that act as counterparties for open market transactions, Bloomberg News said. Talks on how to access a broader array of counterparties other than primary dealers ...

In Praise of the Government's Game-Changer
DealBook — ... . The government’s response to the financial crisis was conducted completely differently from the way the government is supposed to work. But rather than regretting this, we should look at it as a model for solving our policy problems. The government’s response was unprecedented, and not only because the size of the bailout was huge, but also because of the multitude of programs that were created along the way. The Federal Reserve also devised its own alphabet soup of liquidity programs, often related to its discount window, but serving institutions that had never been ...

Window Into Fed Debate Over a Crucial Program
DealBook — Behind closed doors during their most recent meeting, members of the Federal Reserve grappled with whether they should expand a crucial program aimed at loosening credit markets, or begin to scale it back as the economy clawed its way back from recession. Minutes from a September meeting of the Federal Open Market Committee, released on Wednesday, opened a window into the debate inside the sometimes opaque central bank, The New York Times’s Jack Healy reported. Some members of the committee, which sets interest rates and makes other crucial decisions about monetary policy, ...

A New Dow Bubble?
DealBook — ... have rejoined the 10,000 Maniacs. The Dow Jones industrial average closed above the 10,000 level on Wednesday. Stocks first crossed the five-digit benchmark in the midst of the dot-com bubble. It held higher for five years during the housing bubble. Long-term measures suggest it’s now in a new bubble, Breakingviews says. The Dow could move back and forth across 10,000 for years. The Dow broke through 4,000 on Feb. 22, 1995. That was the day Alan R. Greenspan, then chairman of the Federal Reserve , first hinted at a relaxation of monetary policy. At that time, the American ...

Hedge Funds Gain Clout on Capitol Hill
DealBook — ... and other institutional investors and bet on everything from variations in oil prices to the likelihood of mortgage foreclosures - have been under political and financial pressure in recent years; about 1,000 out of 10,000 hedge funds shut down during the last year, in many cases due to poor returns and cash-outs by strained investors. Their critics are legion: President Obama chided hedge funds that balked at making concessions to automakers, saying, “I don’t stand with them.’’ Federal Reserve chairman Benjamin Bernanke said insurance giant AIG crashed because it acted like ...

Bank of America E-Mails Shed Light on Merrill Deal
DealBook — ... , which suggested the Federal Reserve assured the bank that its stock price would rise if it agreed to complete the Merrill deal with government assistance. Later, Fed officials reversed their stance. Bank of America’s stock price plummeted when the deal was announced. The House Committee on Oversight and Government Reform and Investigations is considering holding a fresh set of hearings as early as Thursday, which would call several current and former federal regulators and Bank of America officials to testify, people briefed on the situation told DealBook. Timothy ...

Earnings Outlook Drives Wall Street Higher
DealBook — ... the weight of their consumer banking portfolios. “It’s more of the same silliness,” said Joe Saluzzi, co-head of equity trading at Themis Trading. “I think it’s price-chasing. Price does not equal value.” Gannett, the publisher of USA Today and other newspapers, said profit fell 53 percent and revenue was down 18 percent. Advertising sales were down 28 percent, but the decline was less than in the previous two quarters and Gannett’s stock rose 8.2 percent, to $14.06 a share. The Federal Reserve helped to stoke optimism by announcing that it was testing mechanisms that could ...

New York Fed Tunes Up a Cash Management Tool
DealBook — ... the last year to ensure that “this tool will be ready when and if” the policy-setting Federal Open Market Committee decides to use it. Monetary policy makers have said that the tool — reverse repurchase agreements, also known as reverse repos — could be one way to drain excess reserves when the time comes to reduce the amount of credit that the central bank has provided to the banking system to avert the risk of inflation. “This work is a matter of prudent advance planning by the Federal Reserve , and no inference should be drawn about the timing of monetary policy ...

Einhorn Goes for Gold, Slamming U.S. Policies
DealBook — ... the chief of $5 billion hedge fund Greenlight Capital said.“Although our leaders ought to be making some serious choices, they appear too trapped in the short term and special interests to make them,” Mr. Einhorn said. According to a joint analysis by the Center on Budget and Policy Priorities, the Committee for Economic Development and the Concord Coalition, the projected U.S. budget deficit between 2004 and 2013 could grow from $1.4 trillion to $5 trillion. Last week when Federal Reserve Chairman Ben Bernanke, Mr. Geithner and White House economic adviser Larry Summers ...

Fed Names Economist as Top Bank Regulator
DealBook — The Federal Reserve announced Tuesday that it had named Patrick M. Parkinson, an expert on financial markets, to be the director of its division of banking supervision and regulation. Mr. Parkinson, an economist who has been with the Fed since 1980, succeeds Roger Cole, who retired in August after 30 years at the central bank. The Mr. Parkinson’s appointment comes as Congress considers how to regulate banks and other big financial firms to prevent a repeat of the financial crisis.“As an economist with deep expertise in financial markets, Pat Parkinson will be an important ...

Volcker's Voice Fails to Sell a Bank Strategy
DealBook — Listen to a top economist in the Obama administration describe Paul A. Volcker, the former Federal Reserve chairman who endorsed Mr. Obama early in his election campaign and who stood by his side during the financial crisis, Louis Uchitelle wrote in The New York Times. “The guy’s a giant, he’s a genius, he is a great human being,” said Austan D. Goolsbee, counselor to Mr. Obama since their Chicago days. “Whenever he has advice, the administration is very interested.” Well, not lately. The aging Mr. Volcker (he is 82) has some advice, deeply felt. He has been offering it in ...

Congress Said to Delay BofA Hearing for Interviews
DealBook — ... Secretary Henry Paulson Jr. on Dec. 17 to tell him the bank was considering backing out of the deal because of Merrill’s growing losses, government sources said. Then, Mr. Lewis and two other bank executives - Mr. Moynihan, then the bank’s general counsel, and chief financial officer Joe Price - made that same point in person later that evening when they met with Paulson and Federal Reserve chairman Ben Bernanke in Washington, The Globe said. The government quickly agreed to give the bank $20 billion in aid, in addition to the $25 billion it had already received from the ...

Fed Moves to Curb Bankers' Pay Packages
DealBook — The Federal Reserve announced a plan on Thursday to eliminate pay packages that in the past had encouraged bankers to take the kinds of reckless risks that contributed to the housing bubble, The New York Times’s Stephen Labaton reports from Washington. The move, a response to the public outrage over the bailout of banks and other companies whose executives received lucrative paychecks, reflects a sharp departure from the hands-off approach that has dominated bank regulations for decades. In particular, pay packages at the nation’s largest banks will now come under regular ...

Bernanke Urges Financial Regulatory Overhaul
DealBook — The Federal Reserve chairman, Ben S. Bernanke , prodded Congress on Friday to enact legislation overhauling the nation’s financial regulatory system to prevent a repeat of the banking and credit debacles that thrust the country into crisis. “With the financial turmoil abating, now is the time for policymakers to take action to reduce the probability and severity of any future crises,” Mr. Bernanke said in remarks to a Fed conference in Chatham, Mass., The Associated Press reports. For its part, the Fed has been taking steps to strengthen oversight of banks, and ...

Short Memories at Goldman?
DealBook — ... and Goldman Sachs become bank holding companies — something it had earlier refused to allow Lehman Brothers to do. In practical terms, it wasn’t all that big a deal; it primarily meant the two firms were going to be regulated by the Federal Reserve rather than the ...

French Central Banker Warns on Excessive Risks
DealBook — ... long term reform must not create, in the short run, additional downside risks to economic activity.” Noyer said banks in the long run needed to be robust and better capitalized, and in the short term should hang on to profits to strengthen balance sheets and finance credit.“This would require some restraint in dividend distribution and of course in the overall amount of variable compensation,” he said. “In parallel, all possibilities to issue new equity should be exploited.” U.S. Federal Reserve Chairman Ben Bernanke said last week that requiring big banks to hold more ...

Bill Would Give U.S. New Power to Seize Ailing Firms
DealBook — ... . The measure, directed at institutions whose troubles might pose risks to the financial system, would create a powerful financial services oversight council, led by the Treasury secretary and composed of top regulators, to set policy and tougher regulations for the largest companies and mediate disputes between federal agencies. It would also give the Federal Reserve Board a lead role in directly supervising many of the largest financial conglomerates and provide for greater authority to intervene early if problems arise. The legislation would impose new restraints on ...

Another View: Please Listen to Bair
DealBook — ... , the Federal Reserve ’s former chairman, who insist that dynamic regulation in bank capital requirements and other prudential regulatory metrics needs to be incorporated in any reform package. Dynamic regulation — requiring higher capital, loan provisioning, depository trust fund premiums/resolution fund contributions and the like when the economy is booming, and loosening regulatory requirements somewhat when things are slack — is the only practical way of avoiding future boom and bust crises. But the above is just the tip of the iceberg of disagreement between the F.D.I.C. ...

Fed Leaders Meet Bankers to Stress Limits on Pay
DealBook — The heads of the largest U.S. banks were summoned by Federal Reserve officials on Monday to discuss what is perhaps the most contentious issue of the post-bailout era: pay. The meetings, held by the 12 regional Federal Reserve banks, mirrored the extraordinary gathering convened at the height of the financial crisis last autumn, when government officials sought to rescue the banking system from falling apart, The New York Times’s Eric Dash reported. This time, amid signs that the markets are stabilizing, Fed officials told bankers that they needed to re-examine their ...

Global Banking Fears Lead to Mixed Results
DealBook — ... also rose about 7 percent, closing at $46.48, up $2.91. The focus this week is on labor and the Federal Reserve . The Fed meets Wednesday to assess the economy and set monetary policy and on Friday, unemployment figures come out. The ...

Stocks Lose Steam at Close on Wall Street
DealBook — The Dow Jones industrial average erased almost all of a 156-point rally after the House of Representatives passed a bill to curb rate increases on credit cards, touching off concern about bank earnings. The news outweighed investor optimism after the Federal Reserve said it planned to keep interest rates at a record low, Bloomberg News reported. “Businesses are still cutting back on fixed investment and staffing, though at a slower pace,” the Federal Open Market Committee said in a statement on Wednesday after meeting in Washington. “Activity in the housing sector has ...

Fed Sees No Need to Raise Interest Rates Soon
DealBook — The Federal Reserve signaled on Wednesday it was not close to raising interest rates, saying that the economy remained weak even though the recession appeared to be over, Edmund L. Andrews writes in The New York Times. In a move that could spell the continued success of investment banks’ fixed-income units, the Fed said it would keep its benchmark interest rate at virtually zero, and it made no change to its longstanding mantra that economic conditions were likely to warrant “exceptionally low” rates for “an extended period.” For practical purposes, analysts said, policy ...

Bank of England Adds $40 Billion to Stimulus
DealBook — ... Capital in London, said before the decision. “Britain seems to be lagging even the laggards.” In the United States, the Federal Reserve on Wednesday said it would keep its benchmark interest rate at virtually zero, and that economic conditions were likely to warrant “exceptionally low” rates for “an extended period.” Analysts will be watching the E.C.B. president Jean-Claude Trichet closely for any hints on when the bank, which serves the 16 countries using the euro, might start to unwind the extraordinary measures it took to support banks. In Frankfurt, there have been ...

Fewer Banks Tightening Standards, Fed Says
DealBook — Fewer banks tightened their lending standards for companies and consumers in the third quarter as the economy grew for the first time in more than a year, a Federal Reserve survey showed, according to Bloomberg News. Demand for most types of loans weakened at a smaller number of banks than in the second quarter, the Fed also said Monday in a quarterly survey. For prime residential mortgages, a larger number of banks reported stronger demand, the central bank said. The report helps explain why Fed policy makers said last week that “tight credit” remained a drag on the economy ...

Under Attack, Fed Chairman Studies Politics
DealBook — With the Federal Reserve under more intense attack than at any time in decades, Ben S. Bernanke, the professorial chairman of the central bank, was schooled last month in how to handle the increased political demands of his job. For months, he had warned — without anyone on Capitol Hill appearing to listen — that a seemingly innocuous bill to let Congress “audit” the Fed would gravely threaten the central bank’s independence. It was alarming enough that the bill’s author was Representative Ron Paul, the quixotic Texas Republican whose new book, “End the Fed,” had just landed ...

Global Financial Panic Is Over, Buffett Says
DealBook — ... said rail transport uses one-third less fuel and pollutes the air less than trucks, and that one train can supplant about 280 trucks. Mr. Gates, who is also a Berkshire director, said other sectors might also boost the economy over the long term, including information technology, energy and medicine. Separately, Mr. Buffett advised the U.S. government not to coddle companies that need bailouts to survive or preserve capital.“More sticks are called for,” he said. Mr. Buffett gave Federal Reserve Chairman Ben Bernanke and ...

For Forbes, Wall Street's Most Powerful Player Is ...
DealBook — ... Yet that’s probably not the only reason why Mr. Fink is two spots higher than Goldman’s Lloyd C. Blankfein and 14 higher than JPMorgan’s Jamie Dimon . The BlackRock chief is well-known as a Wall Street executive Washington consults when it’s crafting policy, having helped guide the shape of what is now known as the Public-Private Investment Partnership. It manages pools of assets from Bear Stearns and the American International Group for the Federal Reserve . With that level of influence and reach comes great scrutiny, however, and BlackRock ...

Bernanke Sees Tight Lending Weighing on Economy
DealBook — The chairman of the Federal Reserve , Ben S. Bernanke , warned Monday that high unemployment and a continued reluctance of banks to make loans are likely to slow the economic recovery for the next year, The New York Times’s Edmund L. Andrews reports. And in a departure from the usual practice of Fed chairmen, Mr. Bernanke expressed concern about the recent fall in the value of the dollar — a concern that could put the central bank under new pressure to push up interest rates. Taken together, the Fed chairman’s comments highlighted the difficulties that policy makers ...

Whitney Hasn't 'Been This Bearish in a Year'
DealBook — ... capital again.” Asked by Ms. Bartiromo whether the banking sector was adequately capitalized, Ms. Whitney replied: “No way.” “All this said,” Ms. Whitney continued, “I don’t know what’s going on in the market right now ’cause it makes no sense to me. There’s no root in fundamentals.” Financial stocks briefly pared gains during the interview, following a day when U.S. markets rose broadly, sending indexes to fresh 13-month closing highs. The jump in U.S. markets Monday came after Federal Reserve Chairman Ben Bernanke reinforced expectations that interest rates would stay ...

Gold Continues Its Rise, While Asian Stocks Gain
DealBook — ... high on Wednesday on worries about future inflation and economic uncertainties, while Asian stocks rebounded as the generally bearish dollar kept riskier assets in demand, Reuters reported. Spot gold rose as high as $1,143.95 per ounce in early Asia trade, settling later just above $1,140, with expectations for a continued weakness in the U.S. currency also providing a support. The dollar rose as investors trimmed short positions after euro zone economic policymakers followed U.S. Federal Reserve Chairman Ben Bernanke in commenting about the merits of a strong dollar, but ...

Lawmaker Opposes Fed as Super-Regulator
DealBook — ... spoke to the House Agriculture Committee at the same time the Financial Services Committee was writing a bill to create a systemic risk regulator, Reuters reported. Agriculture Committee Chairman Collin Peterson said he was skeptical “and very much opposed” to giving the job to the Federal Reserve as proposed in a Financial Services Committee draft. Republican Congressman Frank Lucas said “no one can credibly argue” the Fed is qualified to be a market regulator. Mr. Gensler pointed to possible duplication of authority under administration and congressional proposals and ...

BofA Chief: A Tough Job With a Big Upside?
DealBook — ... have recently been made to their ranks, Bank of America’s directors appear not to have asked tough enough questions of Mr. Lewis. Bringing in a more functional and experienced group of directors is a priority, the publication argues. A new face at the top and a revamped board could help turn around another bad situation fairly quickly: the bank’s relations with regulators. Bank of America was tussling with them even before. Mr. Lewis engaged in a public dispute with Ben Bernanke, the Federal Reserve chairman, and Henry M. Paulson Jr., then the ...

Another View: Unintended Consequences on Wall St.
DealBook — Peter J. Solomon, the chairman of the Peter J. Solomon Company, looks at Wall Street’s compensation and the unintended consequences of the banking bailout. Excessive Wall Street compensation illustrates the law of unintended consequences. To stabilize the global financial system, the Federal Reserve , the ...

Shelby Opposes Dodd's Financial Regulatory Bill
DealBook — ... the ability to provide open bank assistance not only to banks, but to any company outside the resolution process. The bill would also allow the Federal Reserve to lend to insolvent firms, which Mr. Shelby argued said would provide, “another avenue for regulators to avoid winding down companies.” “The ability of the F.D.I.C. and the Fed to bail out insolvent institutions gives regulators a way to avoid invoking the resolution authority,” Mr. Shelby said, “significantly diminishing the possibility that resolution will ever be achieved.” Mr. Shelby was also concerned that the ...

Ron Paul Defends His Plan for Fed Oversight
DealBook — ... of Texas played down continuing concerns on Friday that his amendment to give Congress sweeping new oversight powers over the Federal Reserve would compromise the central bank’s political independence. He asserted that the Fed was not truly as independent as it would like the public to believe. “There is already a tremendous amount of political pressure on the Fed,” Mr. Paul, a libertarian Republican, told DealBook. “The Federal Reserve Board chairmen have notoriously been sympathetic to the presidents who might be reappointing them and there has been evidence to show that.” ...

Revisiting a Fed Waltz With A.I.G.
DealBook — ... , The New York Times’s Gretchen Morgenson writes in her latest Fair Game column. It’s must reading for any taxpayer hoping to understand why the $182 billion “rescue” of what was once the world’s largest insurer still ranks as the most troubling episode of the financial disaster. And it couldn’t have come at a more pivotal moment. Many in Washington want to give more regulatory power to the Federal Reserve Board , the banking regulator that orchestrated the A.I.G. bailout. Through this prism, the actions taken in the deal by ...

The US Gubmnt is on Teaser Rates
EclectEcon — ... officials now face a trifecta of headaches: a mountain of new debt, a balloon of short-term borrowings that come due in the months ahead, and interest rates that are sure to climb back to normal as soon as the Federal Reserve decides that the emergency has passed. ...

Fed Said to Ask Banks for TARP Repayment Plans
DealBook — The Federal Reserve asked nine of the U.S. banks that were part of this year’s stress tests to submit plans for repaying the government’s capital injections, a person familiar with the situation told Bloomberg News. The central bank this month asked ...

Wall Street Struggles to Find Traction
DealBook — A disappointing report on consumer confidence and a more sober read on the economy pulled stocks down on Tuesday from 13-month highs, The Associated Press reported. Major indexes posted modest losses in light trading as drops in financial and industrial stocks were tempered by gains in health care companies. The Dow Jones industrial average fell 17 points the day after it jumped by 133. Stocks pulled away from their lows of the day after the Federal Reserve released minutes from its latest rate-setting meeting, where it pledged to keep rates low for the foreseeable future and ...

Emergency Loans Secrecy Defended in Britain
DealBook — ... and the Federal Reserve Bank have entered into similar support operations and similarly have not disclosed the extent of individual support provided to other banks.” Asked about King’s comments on Tuesday that there needed to be a credible plan to reduce Britain’s budget deficit, Myners played down any differences.“Central bank governors are paid and expected to worry. That is their role.” ...

Fed Tightens Regulations on Its Regional Directors
DealBook — The Federal Reserve , under attack in Congress for being too entwined with big banks, closed a loophole on Wednesday that allowed a director at ...

Bernanke Warns of Risks in Push to Revamp Fed
DealBook — The Federal Reserve ’s chairman, Ben S. Bernanke , warned bluntly over the weekend that provisions in financial legislation before the House and Senate would “seriously impair” the Fed as it struggled to maintain financial and economic stability. In an article on the op-ed page of The Washington Post, Mr. Bernanke sharply criticized a Senate provision that he said “would strip the Fed of all its bank regulatory powers” and a House provision to repeal a 30-year-old law “to protect monetary policy from short-term political influence.” The Federal Reserve’s ...

Fed to Test Strategy to Exit Securities Program
DealBook — The Federal Reserve said Monday that it would begin testing its strategy to shrink its trillion-dollar portfolio of mortgage-backed securities and eventually unwind its biggest program to prop up financial markets, The New York Times’s Edmund L. Andrews reports from Washington. The central bank emphasized that the move was strictly an exercise in operational preparedness and did not signal a tightening of monetary policy or an effort to begin raising interest rates. Indeed, Fed officials announced in October that they were exploring the use of so-called “reverse repo” ...

Big Risks to U.S. Bank Stocks Exist, Citi Says
DealBook — ... said there are substantial risks facing U.S. bank stocks now, but in the near term these stocks can grind higher, given a combination of the Federal Reserve ’s accommodative stance and a modest recovery, Reuters reported.“Since there is above-average risk, we would remain very selective focusing on banks that have strong capital positions, while avoiding banks with the combination of relatively high commercial real estate exposure and questionable capital strength,” Citigroup said in a note. The brokerage upgraded ...

Results Hold Steady on Fed's Upbeat Report
DealBook — The stock market struggled but held its ground Wednesday as an upbeat assessment of the economy from the Federal Reserve offset drops in bank and energy stocks, Reuters reported. Most stocks finished higher after the Fed said regional economic activity had generally improved since its last snapshot in October. The central bank also said consumer spending has strengthened even though employment and commercial real estate has remained weak. The Dow Jones industrial average slipped 19 points a day after gaining 126. Reports of analysts’ warnings about bank stocks hurt financial ...

Senator Moves to Hold Up Bernanke Confirmation
DealBook — Senator Bernard Sanders of Vermont said on Wednesday that he would try to block the Senate from confirming Ben S. Bernanke to a second term as chairman of the Federal Reserve . The move is unlikely to derail Mr. Bernanke’s reappointment, but it could slow the confirmation process and give the Fed’s critics additional opportunity to press their case, The New York Times’s Edmund L. Andrews writes. As a practical matter, it means Senate Democratic leaders will have to line up 60 votes in favor of Mr. Bernanke rather than a simple majority at a time when the Federal Reserve is ...

Bernanke Criticizes Attempts to Audit the Fed
DealBook — ... as Federal Reserve chairman on Thursday to express concern about legislation that would put the Fed on a tighter leash and let Congress “second-guess” its decisions. Mr. Bernanke’s chief concern was a proposal by Rep. ...

Bernanke Says Fed 'Should Have Done More'
DealBook — Under fire from Democrats and Republicans alike, Ben S. Bernanke on Thursday defended his record as chairman of the Federal Reserve but conceded that the central bank’s lapses contributed to the financial crisis. “I did not anticipate a crisis of this magnitude,” Mr. Bernanke acknowledged in an occasionally contentious hearing on his nomination for a second term as Fed chairman. Mr. Bernanke volunteered that the Fed had been “slow” in protecting consumers from high-risk mortgages during the housing bubble and that it should have forced banks to hold more capital for all the ...

Bank of America Raises $19 Billion in New Equity
DealBook — ... by reducing government involvement, analysts said. Mr. Lewis is set to retire at the end of the year. In testimony before a Senate Banking Committee hearing on Thursday, Federal Reserve Chairman ...