Archive for the ‘Federal Reserve’ Category


Saturday, January 4th, 2020

Will the ’20s Roar Again?

We are overdue today for another wave of creative thinking about everything—politics, the culture, education and morality. But this time, hold the roaring.

By Daniel Henninger January 2, 2020

If time travel were real, nearly half the U.S. population—and all the Democrats—would ship Donald Trump back to the Roaring ’20s, an era presumably more in sync with his instinct for creative outrage. But voters then would have been as startled by Mr. Trump’s political personality as voters now. Despite the dawn of the Flapper Age, their taste in presidents ran more toward Warren G. Harding, elected in 1920, whom no one would mistake for Donald J. Trump.

Harding’s campaign slogan was “a return to normalcy.” When he died in office 2½ years later, his successor was the uber-normal Calvin Coolidge, who won election on his own in 1924.

Other than the American presidency, though, the 1920s were in no way normal. In the U.S. and much of the world, the decade witnessed a remarkable economic and industrial boom. If we’re going to compare the ’20s then to the ’20s being born this week, an economic footnote is in order about a main cause of the first “roaring.”

When the 16th Amendment created the personal income tax in 1913, the original top marginal rate was 7%. By 1920 it was 77%, in part because of the Great War.

At the urging of Treasury Secretary Andrew Mellon, Congress enacted tax cuts in 1921, 1924 and 1926, with the top rate falling in middle-decade to 25% on incomes above $100,000. Prosperity followed, just as it did after the Kennedy tax cuts in the 1960s, Reagan’s reductions in the 1980s, and today—undeniably—after the Trump corporate rate cut of 2017. As in the 1920s, the consumer is again king, with disposable income available to buy an innovative economy’s extraordinary array of new products.

Pessimists say the Great Depression silenced the 1920s’ roar. It did, and some of its lessons deserve mention.




Sunday, May 5th, 2019


If I remember correctly, wasn’t the unsealing of Obama’s opponent’s divorce papers  in either his Illinois or  U.S. Senate race, lead to Obama’s  win over his opponent? Very  Interesting    The sad state of American politics of personal destruction as conducted by the Left.   Nancy
By Stephen Moore    Mr. Moore is a senior fellow at the Heritage Foundation and an economic consultant with FreedomWorks.  He was a senior economic adviser to the Trump campaign in 2016.
May 3, 2019

When President Trump asked me to serve as a member of the Federal Reserve Board, I was honored. I never imagined the storm that would follow. The left and the media instantly launched a relentless campaign against me. Last week a reporter who has covered the Fed for 30 years told me he’d never seen anything like it. On Thursday I reluctantly threw in the towel and asked the president not to nominate me.

I knew that many of my ideas on monetary policy were controversial and outside the box. That’s why the president picked me. My central argument is that economic growth does not cause inflation—an assault on the core belief of the Keynesian economists at the Fed, whose fear of supply-side growth has often misdirected monetary policy, most recently late last year. As someone who worked with Mr. Trump as a senior economic adviser to his campaign, I am thrilled that 3% to 4% growth with stable prices has been achieved, and I believe it can be sustained. I also believe the Fed should stop targeting interest rates and instead focus on a stable dollar by following commodity prices along with other inflation measures as a leading indicator of whether prices are rising or falling.

I was naive. I believed that to be confirmed I would simply need to defend these ideas and my free-market economic philosophy in general. I relished that debate, especially because so many of my harshest critics were completely wrong about the Trump economy.

A majority in the Senate viewed my economic-policy expertise favorably, and my confirmation seemed likely. It helped my case that I had been one of the most outspoken critics of the Fed in December, when it raised interest rates. After a 4,000-point collapse in the Dow Jones Industrial Average, Chairman Jerome Powell early this year backed away from future rate increases and disavowed his December statement that the Fed’s asset sales were on “autopilot.” The market and the economy sprang back to life.

What did me in was not my economic ideas but gutter campaign tactics and personal assaults. I’ve been called an adulterer, a misogynist, a tax cheat, a deadbeat dad, antigay and mentally unfit. A Washington Post editorial warned that I was a “dangerous” pick for the Fed, and a columnist said I could cause a “global financial calamity.” They must imagine I have superheroic powers of persuasion. If appointed, I would have been one of seven Fed governors.




Tuesday, November 28th, 2017

CFPB Official Sues Trump Administration Over Agency Leadership

Leadership contest is the latest battle to control agency’s direction

Leadership contest is the latest battle to control agency’s direction

White House budget chief Mick Mulvaney is the president’s pick to be acting director of the Consumer Financial Protection Bureau.
White House budget chief Mick Mulvaney is the president’s pick to be acting director of the Consumer Financial Protection Bureau. PHOTO: PABLO MARTINEZ MONSIVAIS/ASSOCIATED PRESS

WASHINGTON—An Obama-era official at the Consumer Financial Protection Bureau sued the Trump administration on Sunday night to block budget director Mick Mulvaney from taking control of the agency.

Leandra English, a career staffer appointed Friday to lead the CFPB by former director Richard Cordray, filed the lawsuit in federal court the night before the bureau was set to reopen with dueling temporary leaders vying to take it over. In doing so, she touched off a legal fight that will trigger court interpretations on how different statutes regarding succession apply to the unusual struggle over control of a federal agency.

President Donald Trump asserts he has the power to appoint an acting director, while the departing chief believed the law said otherwise.



Wednesday, February 17th, 2016
ICON Lecture Series 1016 Speaker Schedule, Chapel Hill, North Carolina

ICON Lecture Series 1016 Speaker Schedule, Chapel Hill, North Carolina



Monday, November 23rd, 2015



Reining In a Sprawling Federal Reserve

The Fed’s greater powers increase the need for close scrutiny of its activities.

Jeb Hensarling  Mr. Hensarling, a Republican congressman from Texas, is chairman of the House Financial Services Committee
Nov. 20, 2015
Since the 2008 financial crisis, the Federal Reserve has morphed into a government institution whose unconventional activities and vastly expanded powers would scarcely be recognized by drafters of the original legislation that created it. Regrettably, commensurate transparency and accountability have not followed.
Since September 2008, the Fed’s balance sheet has ballooned to $4.5 trillion, equal to one-fourth of the U.S. economy and nearly five times its precrisis level. And after seven years of near-zero interest rates, the central bank’s so-called forward guidance provides almost no guidance to investors on when rates might be normalized. This uncertainty is a significant cause of businesses’ hoarding cash and postponing capital investments, and of community banks’ conserving capital and reducing lending.
Adding to the economic uncertainty, the 2010 Dodd-Frank law granted the Fed sweeping new regulatory powers to intervene directly in the operations of large financial institutions. The Fed now stands at the center of Dodd-Frank’s codification of “too big to fail.” With respect to these firms, the Fed is authorized to impose “heightened prudential standards,” including capital and liquidity requirements, risk management requirements, resolution planning, credit-exposure report requirements, and concentration limits. The Fed is even authorized, upon a vague finding that a financial institution poses a “grave threat” to financial stability, to dismantle the firm. The Fed, in short, can literally occupy the boardrooms of the largest financial institutions in America and influence how they deploy capital.
The Fed’s monetary policy must be made clear and credible, and its regulatory activities must comport with the rule of law and be subject to public scrutiny. To accomplish this, the Fed Oversight Reform and Modernization Act of 2015, sponsored by Rep. Bill Huizenga (R., Mich.), should be enacted. Here are the main parts of the FORM Act, which was passed by the House of Representatives on Thursday.
In regard to monetary policy, the Fed must publish and explain with specificity the strategy it is following. The Fed retains unfettered discretion to choose the rule or method for conducting monetary policy. The FORM Act simply requires the Fed to report and explain its rule, and if it deviates from its chosen rule, why. Economic history shows that when the Fed employs a more predictable method or rules-based monetary policy, more positive economic outcomes result.




Thursday, November 5th, 2015



Wednesday, April 29th, 2015



What’s Wrong With the Golden Goose?

‘Secular stagnation’ isn’t to blame for lousy U.S. growth rates. Obama’s higher taxes and regulatory assault are.

Phil Gramm   Mr. Gramm, a former Republican senator from Texas, is a visiting scholar at the American Enterprise Institute
EXCERPT FROM THIS ARTICLE:   Marginal tax rates on ordinary income are up 24%, a burden that falls directly on small businesses. Tax rates on capital gains and dividends are up 59%, and the estate-tax rate is up 14%. While tax reform has languished in the U.S., other nations have cut corporate tax rates. The U.S. now has the highest corporate rate in the world and the most punitive treatment of foreign earnings.

Meanwhile, federal debt held by the public has doubled, so a return of interest rates to their postwar norms, roughly 5% on a five-year Treasury note, will send the cost of servicing the debt up by $439 billion, almost doubling the current deficit.

Large banks, under aggressive interpretation of the 2010 Dodd-Frank financial law, are regulated as if they were public utilities. Federal bureaucrats are embedded in their executive offices like political officers in the old Soviet Union. Across the financial sector the rule of law is in tatters as tens of billions of dollars are extorted from large banks in legal settlements; insurance companies and money managers are subject to regulations set by international bodies; and the Consumer Financial Protection Bureau, formed in 2011, faces few checks, balances or restraints

Since the Obama recovery began in the second quarter of 2009, public and private projections of economic growth have consistently overestimated actual performance. Six years later, projections of prosperity being just around the corner have given way to a debate over whether the U.S. has fallen into “secular stagnation,” a fancy phrase for the chronic low growth seen in much of Europe.

This is just another in a long line of excuses. America’s historic ability to outperform Europe is well documented; we call it American exceptionalism. It has always been based on the fact that the U.S has had better, more market-driven economic policies and our economy therefore worked better. But, as the U.S. economy is Europeanized through higher taxes and greater regulatory burdens, American exceptionalism is fading away, taking economic growth with it. (more…)



Tuesday, January 7th, 2014


Today marks the 100th anniversary of the Federal Reserve Act, the history of which mirrors the Affordable Care Act, better known as Obamacare.

Both acts were revolutionary, the first agenda item on each president’s to-do list, no matter that after 1912, when President Woodrow Wilson was elected, a major economic slump punctuated the economy. The Federal Reserve bill, like Obamacare, was intensely partisan. Wilson’s liberal Democrats, who held both houses of Congress, wanted a completely government-controlled system for a central bank and currency, whereas Republicans favored mostly private regulation.

Democrats prevailed, jamming the measure through the Senate by a divided vote of 54 to 34 on Dec. 19, 1913. A conference committee approved it on Dec. 22, followed by a House vote of 298 to 60, with 76 not voting. The Senate passed the conference report on Dec. 23 by 43 to 25, with 27 not voting and one vacancy. Not a single Senate Democrat opposed the conference report, only two in the House, and the president signed it the same day. (more…)



Tuesday, November 12th, 2013


Confessions of a Quantitative Easer
Nov. 12, 2013

I can only say: I’m sorry, America. As a former Federal Reserve official, I was responsible for executing the centerpiece program of the Fed’s first plunge into the bond-buying experiment known as quantitative easing. The central bank continues to spin QE as a tool for helping Main Street. But I’ve come to recognize the program for what it really is: the greatest backdoor Wall Street bailout of all time.

Five years ago this month, on Black Friday, the Fed launched an unprecedented shopping spree. By that point in the financial crisis, Congress had already passed legislation, the Troubled Asset Relief Program, to halt the U.S. banking system’s free fall. Beyond Wall Street, though, the economic pain was still soaring. In the last three months of 2008 alone, almost two million Americans would lose their jobs.

The Fed said it wanted to help—through a new program of massive bond purchases. There were secondary goals, but Chairman Ben Bernanke made clear that the Fed’s central motivation was to “affect credit conditions for households and businesses”: to drive down the cost of credit so that more Americans hurting from the tanking economy could use it to weather the downturn. For this reason, he originally called the initiative “credit easing.”

My part of the story began a few months later. Having been at the Fed for seven years, until early 2008, I was working on Wall Street in spring 2009 when I got an unexpected phone call. Would I come back to work on the Fed’s trading floor? The job: managing what was at the heart of QE’s bond-buying spree—a wild attempt to buy $1.25 trillion in mortgage bonds in 12 months. Incredibly, the Fed was calling to ask if I wanted to quarterback the largest economic stimulus in U.S. history.

This was a dream job, but I hesitated. And it wasn’t just nervousness about taking on such responsibility. I had left the Fed out of frustration, having witnessed the institution deferring more and more to Wall Street. Independence is at the heart of any central bank’s credibility, and I had come to believe that the Fed’s independence was eroding. Senior Fed officials, though, were publicly acknowledging mistakes and several of those officials emphasized to me how committed they were to a major Wall Street revamp. I could also see that they desperately needed reinforcements. I took a leap of faith.

In its almost 100-year history, the Fed had never bought one mortgage bond. Now my program was buying so many each day through active, unscripted trading that we constantly risked driving bond prices too high and crashing global confidence in key financial markets. We were working feverishly to preserve the impression that the Fed knew what it was doing.

It wasn’t long before my old doubts resurfaced. Despite the Fed’s rhetoric, my program wasn’t helping to make credit any more accessible for the average American. The banks were only issuing fewer and fewer loans. More insidiously, whatever credit they were extending wasn’t getting much cheaper. QE may have been driving down the wholesale cost for banks to make loans, but Wall Street was pocketing most of the extra cash. (more…)



Sunday, October 27th, 2013


Book Review: ‘The Map and the Territory,’ by Alan Greenspan

Alan Greenspan argues that Wall Street didn’t predict the 2008 crisis because it paid scant attention to the insights of behavioral economics.

Oct. 22, 2013

EXCERPT FROM THIS ARTICLE:  Bubbles and crashes will always be characteristics of free-market systems, but they need not lead to economic crises. In 1987 the stock market fell over 20% in a single day, but the effect on economic activity was minimal because holders of common stock weren’t highly leveraged. The bursting of the Internet bubble in early 2000 left only a mild imprint on the financial system and the real economy for the same reason. The crash of the housing bubble was devastating because the toxic mortgage-backed assets were held by highly leveraged institutions, and this debt was short-term rather than “permanent” and thus especially susceptible to “runs” where lenders were unwilling to “roll over” their short-term loans. “It was the capital impairment on the balance sheets of financial institutions that provoked the crisis,” Mr. Greenspan writes. In his view, the answer is not more regulation but more capital.

“The Map and the Territory” ranges beyond the market crisis and predictive models. Mr. Greenspan offers a conservative but balanced discussion, for instance, of the need to restrain the growth of entitlement spending. In his section on income inequality he emphasizes the role of globalization and the rise in stock-based compensation, as well as the failure of our education system to produce skills for the workforce that match the needs of the economy. He says that immigration reform, by loosening the requirements for H-1B visas, would allow us to draw on a large pool of skilled workers abroad and thus stabilize income inequality. At the moment, immigration restrictions protect, and thus subsidize, high-income earners from global wage competition.

The financial crisis of 2008 and the deep recession that followed forced each of us—perhaps most notably, Alan Greenspan —to question the fundamental assumptions about risk management and economic forecasting. Mr. Greenspan, the nation’s chief forecaster as chairman of the Federal Reserve Board, steered the nation through almost two decades of prosperity and relative stability, retiring from the Fed in 2006 with an unparalleled reputation for prescience. And then came the economic crisis, and no one’s reputation for prescience survived.

In prepared remarks before a congressional hearing a month after Lehman’s September 2008 bankruptcy, Mr. Greenspan declared: “Those of us who have looked to the self-interest of lending institutions to protect shareholders’ equity (myself especially) are in a state of shocked disbelief.” He was hardly alone in failing to predict the economic tsunami. Equally clueless were government officials, Wall Street practitioners and professional economists. In “The Map and the Territory,” Mr. Greenspan tries to explain what went wrong and offers suggestions for how we can do a better job. (more…)

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