Fed Can't Backtrack On Regulatory Reforms

George Yacik - INO.com Contributor - Fed & Interest Rates


I’ve been pretty harsh in this column on Federal Reserve monetary policy, but the one area that I haven’t written much about– financial regulation – is probably the main area where the Fed does deserve a lot of credit.

In her speech at the Jackson Hole symposium late last week, Fed Chair Janet Yellen probably disappointed a lot of market watchers for her failure to talk about interest rates or unwinding the Fed’s balance sheet. Instead, she spent most of her speech defending the Fed’s actions in the regulatory realm in the wake of the global financial crisis and pushed back against critics who want to roll back those regulations, including President Trump, who vowed that he wants to “do a big number” on Dodd-Frank.

If Yellen wants to be reappointed to her position by Trump when it ends in February, she certainly didn’t sound like it. Then again, making comments in opposition to Trump is hardly a heroic stance.

Still, she deserves credit for defending the Fed’s position on bank regulation, and the next Fed chair, whether it’s Yellen, Gary Cohn, or someone else, should stick with the current policy, which will go a long way toward keeping our banking system safe and secure and make sure that the global financial crisis doesn’t repeat itself. After all, if you can’t trust keeping your money in a bank, nothing else matters. Continue reading "Fed Can't Backtrack On Regulatory Reforms"

Put Your Money Where Your Mouth Is

George Yacik - INO.com Contributor - Fed & Interest Rates


Last week Federal Reserve Governor Jerome Powell joined the chorus of prominent industry leaders and government officials calling for reform of the American housing finance system, namely by reducing the government’s role in the business and bringing in more private capital.

Some questioned why Powell should speak on this subject, given that – as he told his American Enterprise Institute audience –the Fed “is not charged with designing or evaluating proposals for housing finance reform.” Still, he pointed out, “we are responsible for regulating and supervising banking institutions to ensure their safety and soundness, and more broadly for the stability of the financial system.” Besides, he noted, he was expressing his own personal views on the subject, not necessarily the Feds.

But what caught the attention of a lot of people, including myself, was the sense of urgency for reform that Powell claimed existed. Continue reading "Put Your Money Where Your Mouth Is"

Want To Solve The Fannie-Freddie Quandary? Do Nothing

George Yacik - INO.com Contributor - Fed & Interest Rates


There have been lots of ideas about how to restructure Fannie Mae and Freddie Mac, the twin government-sponsored enterprises (GSEs) that purchase the vast majority of residential mortgage loans originated in the U.S. But the one idea that I haven’t heard mentioned, which seems to make the most sense, is: Don’t do anything.

The two agencies used to be hybrid public-private entities, their stock owned by investors but with an “implied” government backing of the mortgage-backed securities they sell. Both of them failed during the global financial crisis, burdened with billions of dollars of bad subprime loans, and were taken over by the government in 2008. Although they remain in conservatorship to this day, they remain the backbone of the American residential mortgage banking system. Continue reading "Want To Solve The Fannie-Freddie Quandary? Do Nothing"