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Stanley Fischer, former head of the Bank of Israel, is the likely candidate for vice chairman of the U.S. Federal Reserve in 2014. Fischer is author of a 1977 paper in which he supported an activist central bank monetary policy to tackle economic downturns. As deputy director of the IMF he helped build the "Washington Consensus," which supported flexible exchange rates, free capital flows and balanced budgets. The IMF austerity policies came under much criticism in S. Korea, other Asian countries, Russia, and Latin America during this period, especially high interest rates and sharp spending cuts during downturns. He is a former MIT professor and a dual citizen of Israel and the U.S., born in Zambia (Northern Rhodesia).

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The ECB stands ready to act with the unanimous support of its 25 member governing policy, says Mario Draghi, president of the ECB. Draghi said that "if oil feeds into other prices, that could generate exactly what we want to avoid, namely a spiralling downward phenomenon" for wages and prices. Mark Carney of the Bank of England, says he will see "how things evolve." The U.S. Federal Reserve might slow planned rate increases in 2016, if inflation remains well below the target of 2%, and conditions indicate adverse effect on the economy.

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U.S. Federal Reserve chairman Bernanke, says the Fed will keep interest rates low till unemployment reaches 6.5%, as long as inflation remains at about 2%. If unemployment reaches 6.5%, and this is because more people are dropping out of the labor market, he will take this into account. If unemployment stays high the Fed indicated in its statement that it would tolerate a higher inflation of 2.5%, as long as the longer term outlook was for inflation to be at 2%. Bernanke said this doesn't mean monetary policy is on autopilot, because the Fed will watch conditions carefully and will leave room for flexibility- keeping an eye out for new asset bubbles that could develop, and monitoring labor market conditions and inflationary pressures and inflation expectations. If inflation falls well below 2%, or unemployment rate falls mainly because of people dropping out of the labor market, the Fed may continue to keep interest rates low. This policy was announced as U.S. fiscal cliff deficit negotiations continued in Dec. 2012 with one scenario being considered by both political parties being going over the Jan. 1 deadline before coming to an agreement. Bernanke pointed to this, saying "this is a major risk factor right now." The Fed's activist policy in economic policy has given financial markets and business a measure of stability not provided by government and Congress. Fed policy is to buy $40 billion of mortgage securities, and $45 billion of long term Treasury securities for each month in 2013. It will fund the purchases by adding reserves to the banking system, which is to say that it will print money to buy more bonds. This is a major decision by the Fed in that the Fed has shied away from unemployment targets in the past. Bernanke described this action as a new"automatic stabilizer" in the U.S. financial system- if unemployment rises investors know this pushes the Fed's interest rate increases further down the road and would drive interest rates down, if unemployment drops sooner than expected, investors anticipating Fed's rate increases would drive long term interest rates up, to keep stable growth....

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Crypto currency Terra founder Do Kwon is arrested in Montenegro. US and South Korean authorites have lawsuits against the cryptocurrency founder saying financial crimes were committed. About $40 billion in value of assets was wiped out in this scheme. Terra founder claimed the support for the currency came from algorithms as there was no solid asset at a bank supporting the currency. To strain credibility further the currency was called Stablecoin. Kwon Do was a computer science degree graduate from Stanford. The use of tech algorithms or computerized programs to create currency that has always been done by central banks of each country- such as the Federal Reserve in the US -was possible because of the culture set by Silicon Valley in the San Francisco region of California that has prevailed in the last two decades. Without this culture and its spread across America and the world no sane person would even think of putting out currency, which is the sole responsibility of the government and central bank of each country. Too many people were hurt, lives disrupted or damaged by the financial crisis from faulty mortgages in 2009 for the Federal Reserve and the Biden administration to allow cryptocurrency or some other such scheme to operate and repeat these mistakes.   ...

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The U.S. Federal Reserve issued the results of the third round of stress tests since 2009. It said 18 0f 19 financial firms had enough capital buffers to continue lending in a sharp decline in the economy with a fall in housing prices and the stock market and unemployment rising to 13%. Ally Financial failed the test. Citigroup, MetLife and SunTrust Banks were asked to resubmit their capital plans to the Fed. Citigroup's dividend plan was rejected. No banks were asked to raise capital. J.P. Morgan and other banks were allowed to issue dividends and buyback shares. J.P. Morgan plans to repurchase $15 billion in stocks in the next 12 months. Wells Fargo and U.S. Bancorp also plan to issue dividends and buyback shares. Analyst estimates are for $32 billion in added dividend increases and share buybacks in in the next 12 months. The results are a boost for bank stocks.

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The U.S. Federal Reserve gives banks 2 more years to sell their stakes in private equity, venture capital and hedge funds under the Volcker Rule. This extends the deadline for divestiture to 2017 from 2015. The reason given is that it will reduce the disruptive effects of large divestitures on markets.

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The U.S. Federal Reserve released its new economic projections for GDP growth, inflation and unemployment in 2012-2014 and the decisions reached by the June 2012 Fed Open Market Committee (FOMC) meeting. This follows uncertainty in financial markets with the $125 billion rescue of Spanish banks by the EFSF, the eurozone rescue fund, and 10 year Spanish bond yields reaching 7% even after the rescue announcement. The Fed lowered all its forecasts to reflect the gloomier outlook. The "central tendency" is for the U.S. GDP to be in the range of 1.9%-2.4%, dropping it by 0.5% from the April forecast and 2013 forecast with a similiar drop to 2.2%-2.8%. 2014 GDP forecast is at 3.0-3.5% Inflation is forecast at 1.2%- 1.7% range, instead of 1.9%-2.0% for 2012 and is at 1.5%-2.0% for 2014. Unemployment is is forecast at 8.0%-8.2%, increasing by 0.2% for 2012 from the April forecast, and with a similar increase is at 7.5%-8.0% in 2013. Unemployment gradually declines to 7.0-7.7% in 2014. The decision reached by the FOMC is for the Fed to continue its program called Operation Twist to extend the average maturity of its balance sheet beyond June 2012....

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Thomas Hoenig was Governor of the Kansas City Federal Reserve Bank for 20 years. Here he talks about the dangers of "too big to fail" with Gretchen Morgenson of the New York Times. He is due to retire at the age of 65 in 2011. Hoeinig has stood for conservative safe financial practices for U.S. financial institutions throughout his 20 year old career, and cautioned against extending the government safety net for banks that engage in risky financial activities including derivatives trading. And essential element of safe financial practice and part of necessary market discipline, he has pointed consistently, is the fear that taking on risky activities or acting recklessly has a price- creditors can take out their funds if they see a banks as unsafe, and the financial institution may have to be broken up or closed. He joins Alan Meltzer in his criticism of Federal Reserve policies under first Greenspan and then Bernanke that take on the job of stimulating the economy and creating jobs through a very loose monetary policy after the collapse of a bubble. Hoenig sees the role of the Fed in such situations as a neutral player. The reason say Meltzer and Hoenig is that the Fed has not given enough thought and attention to the long term consequences of its policies. What were the consequences of the low rate policies in 2003 asks Hoenig? It promoted another bubble and the mortgage meltdown of 2008. What were the consequences of QE II asks Meltzer in an op-ed piece in the Wall Street Journal on August 11, 2011, "The Folly of Economic Short-Termism?" It has failed to revive the economy or reduce unemployment. Hoenig also points to questions of fairness and equity that arise when banks are treated differently and farmers, seniors and other groups are asked to make sacrifices....

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Matt O'Brien points out that the Chinese currency may be overvalued as other currencies including the euro and the Japanese yen weakened. Since 2005 China let the yuan appreciate very gradually. As China's economic growth slowed in 2014 investor outflows have increased with an estimated $800 billion leaving the country. China has spent some of its reserves to keep it stable. Before the move the yuan was managed by letting it trade up or down 2% each day around a midpoint set by the government. The new setup keeps this but lets the market set the midpoint based on where it closed the prior day. This move was recommended by the IMF to help in the transition of the yuan to becoming a reserve currency. O'Brien points out that the soft peg to the U.S. dollar means the yuan appreciated 9.2% against the euro and 57.8% against the Japanese yen in the years 2013-2015, and this is happening as the U.S. Federal Reserve is planning to raise interest rates- the real trade weighted exchange rate being up 14% for the yuan in the last 12 months. The 8.3% decline in the exports for July 2015 over the prior year led the government to this action. The increase in investor outflows as a result will lead to further declines, with some estimates of the eventual decline in the yuan at about 10%....

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According to real estate data firm CoreLogic, 38% of U.S. home owners who took a second mortgage on their homes are under water on their loans. 18% of borrowers who did not take a second mortgage are under water and have negative equity in their homes. Second mortgages are loans taken out on a property that are subordinate to first mortgages, including home equity loans and lines of credit. Borrowers with second mortgages have an average of $83,000 in negative equity compared to $52,000 for borrowers without second mortgages according to CoreLogic. During the boom borrowers took out cash using home equity loans and lines of credit for everything from home renovations and automobiles to tution and other expenses. Federal Reserve Board data show homeowners took out a huge amount, $2.69 trillion, from their homes for 2004-2006. Overall the number of underwater homeowners, or homeowners with negative equity in their homes, remained steady, according to CoreLogic's report- 10.9 million Americans in the first quarter of 2011, compared to 11.1 million for the fourth quarter of 2010, 22.7% of all homeowners nationwide compared to 23.1%. The slight decline reflected completed foreclosures, suggesting that the market conditions have not changed. Roubini and other experts predicted large housing losses in 2011-2012. This also affects America's largest banks. While the large part of the first mortgages were bundled and sold as securities, the home equity loans remain on bank balance sheets. About three fourths of the $950 billion in home equity loans outstanding were held by commercial banks at the end of 2010. Over 40% of this is on the books of Wells Fargo, Bank of America, J.P. Morgan Chase, and Citigroup. A writedown on these loans could use up a significant part of the bank's capital....

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Fletcher cites statistics from the federal Bureau of Labor Statistics showing that between December 2007 and June 2010, private sector employment in Texas went down by 0.6%. During that period public sector jobs increased by 6.4%. Government employees make up about 17% of the workforce in Texas. The Texas economy gets a large amount of federal money because of military installations and NASA- $227 billion in 2009, according to the Census Bureau. By comparison California received $346 billon in 2009. During the recession period after the global financial crisis of 2008, Texas received $25 billion in stimulus money. Richard Fisher of the Dallas Federal Reserve Bank acknowleges the federal money going into Texas, yet he points out the driving force in the economy of Texas is still the private sector. For the private sector there are several advantages to being in Texas. There are lower taxes- no state income tax and lower business taxes. The large supply of land for development and few land-use restrictions make development easier. Corporate efficiency was a key advantage cited by Fluor when it moved from Orange County, California to Texas. A growing energy sector has helped, along with the growing trade with Mexico. The housing regulations in the state have acted as a check on housing prices, and left Texas with less of the detrimental effects of the housing mortgage crisis than the rest of the nation, especially California and Florida. The governor of Texas, Rick Perry, says he is not against all regulation, and the kind of housing regulation in Texas certainly has played a good role for Texas. Perry's tort reforms have reduced the legal burden on business prevalent in the rest of the U.S....

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In a conversation before an audience at the IMF on May 6, 2015, U.S. Federal Reserve chairwoman, Janet Yellen, says about stock market valuations in early 2015- "I would highlight that equity market valuations at this point are generally quite high. Not so high when you compare returns on equity to returns on safe assets like bonds, which are also very low, but there are potential dangers there." She was responding to a question from IMF Managing Director Christine Lagarde on whether the Fed's low rate policies were creating a bubble in financial markets. S&P 500 company earnings for the 1st quarter- with 417 companies having reported results- show earnings growth of 0.2%, according to FactSet. The Dow Jones Average is up 0.1%, and the S&P 500 up 1%, for the year. Yellen said about financial stability- "Risks to financial stability are moderated, not elevated at this point. There was a great deal we missed before the crisis, I believe we are better prepared." The preparation includes the stress tests and higher capital requirements being set by the Fed to ensure banks can cope with losses, and the living wills arrangement for too-big-to-fail companies. Yellen conveyed her own sense of the proper role of the financial sector and the role of the Federal Reserve in promoting that role for social, economic and technological progress, in a clear and insightful manner- " A well-functioning financial sector promotes job creation, innovation and inclusive economic growth. But when the incentives facing financial firms are distorted, these firms may act in ways that can harm society. Appropriate regulation, coupled with vigilant supervision, is essential to address these issues."...

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U.S. Federal Reserve governor Daniel Tarullo tells the Council on Foreign Relations that so much remains to be done four years after the financial crisis. The law firm of Davis Polk says 67 percent of deadlines were missed for new rules required to be set in place by the Dodd-Frank legislation, including the Volcker Rule. Tarullo said: "It is sobering to recognize that more than four years after the failure of Bear Stearns began the acute phase of the financial crisis, so much remains to be done." Tarullo fears that crucial momentum may be lost because of the long delays stemming from resistance by the banks. Tarullo met with bank CEO's in April 2012. Banks have protested that Fed stress tests have not revealed the parameters for the testing. Tarullo's response given at a recent Fed conference in Chicago were that this would let banks game the exercize by running the Federal Reserve model and not improving risk management and capital planning, making this a mechanical compliance exercize. Banks have particularly opposed a requirement that limits the risk in business between two banks to 10% of their credit risk....

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U.S. job growth slowed in February to just 20,000 jobs in nonfarm sector following strong gains in December and January. The 3 month average is 186,000 jobs created. Unemployment rate dropped to 3.8%. The figures are watched closely as Europe and China are showing slow growth. The European Central Bank said it will not increase interest rates till 2020 and announced fresh stimulus loans. The U.S. Federal Reserve is not expected to raise rates in the next few months. Economic output growth was 0.5% in the first quarter after 3% growth in 2018. Other reports show labor scarcity with wage growth outpacing inflation. 

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The NASDAQ index reached 5000 by April 2015, a level reached in the stock market boom in 2000. Yet investment strategists who were wary of the stock market in the period before the 2000-2002 collapse of the market see this market differently. The NASDAQ itself is not what it was in 2000, with the 2015 NASDAQ component stocks being different for the most part, and the healthcare and other sectors better represented in the index. Only three of the stocks in the top ten in 2000 are in the top ten today, including Microsoft. The S&P 500 trades in April 2015 at 18.5 times its company earnings for the past 12 months, compared to an historical average of 15.5, according to research firm Bespoke. A big part of the difference today is the investment climate of low inflation, which gives the U.S. Federal Reserve flexibility in raising rates. Low rates make bonds with lower yields less attractive, and increase the present value of future earnings. The yield of the 10 year U.S. Treasury was 1.917% on April 25, 2015. In April 2000 it was 6%, and in mid 2007 it was 5.3% before the financial crisis in the two periods. James Paulsen, chief investment strategist at Wells Capital Management oversees $347 billion in fund investments. He also was wary of the U.S. stock market in 1999, yet he does not see the similiar kind of risks today, and sees a long term bullish trend. The scenario he envisages is more of a pause or temporary decline. Paulsen has shifted money to European markets, as U.S. stocks are becoming more expensive relative to their European counterparts, a strategy that is being followed by other money managers since 2014. Higher price volatility is seen in the markets in 2015, with the S&P 500 up 2.9% for the first four months of 2015, and the Dow up 1.4%. ...

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U.S. Federal Reserve officials are likely to take a wait and see approach based on incoming data following a likely rate increase in December 2018. Jerome Powell, Fed chairman and other members are likely to want to see how the economy is holding up from moves already taken. Under this evolving data dependent approach the Fed will step back from the predictable path of quarterly rate increases of the last 2 years.

Inflation has softened in the last quarter of 2018 with falling oil prices, reducing the Fed's sense of urgency. The dents in the stock market have not changed the situation of low unemployment and strong growth.

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The Fed and FDIC issue a report on the failure to regulate SVB and Signature bank. It says the failure to regulate stems from the law passed by Congress leaving a gap for regulation of mid sized banks, and the appointment of Randall Quarles to the Fed supervisory position by then president Trump in 2019. The result was a 40% decline in hours spent by supervisory regulators on the SVB bank even as its assets grew rapidly. Overall the supervisory hours for the Federal Reserve system as a whole declined. This led to cultural issues under Mr. Trump where less regulation the better was the prevailing attitude. Fed report in Fedspeak says- "Staff felt a shift in culture and expectations from internal discussions and observed behaviour that changed how regulation was executed." It would take a special effort by the Biden administration to bring the situation under control to keep the nation's banking system healthy and strong to support the investments the economy needs. After the 2009 crisis and the decade lost to the US economy and the American people from losses in unemployment and savings as a result of deregulated banks, another crisis was prevented. This time the Fed, FDIC, General Accountability Office are all clear about the value and role of regulation in a properly functioning economy, instead of the pushback after the 2009 crisis to regulation. Once again president Biden has shown the way.   ...

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The return of sound money is good for the US economy and US savers among the common people. The end of tech excess valuations and profits is also good for the US economy. Joe Davis of Vanguard talks about ways in which the policies of the Biden administration and the US federal Reserve's Jay Powell are benefiting the US and the American people including millions of savers after the excesses of Tech and the financial sector since 2009. The return to a more stable long run economy is now facing the US, says Davis.

The rest of us other than them, other than the Tech sector and others who benefitted from negative rates, we will benefit from this change. By Vanguard calculations ten year return forecasts will increase by 2% percentage points annualized for equities and for fixed income since last year. This is a good thing for America.

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The Beige Book report of the U.S. Federal Reserve for April 23-May 25, 2012, showing moderate growth in 10 of 12 bank districts.

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President Biden's action to protect consumers when there is a run on the banks such as SVB bank, Signature, Republic bank in the US. And the coordinated action with European central banks and European governments that protect the international banking system because of the interconnections between US and European banks and risks of contagion from one region to another. Janet Yellen at Treasury and the FDIC, Federal Reserve, Swiss central banks worked together on Credit Suisse and other banks affected by the collapse of Silicon Valley Bank and Signature bank. The Federal Reserve bank of San Francisco supervised SVB bank and flagged the problems of it not being able to sustain itself in a crisis with enough cash on hand. Congress under president Trump removed banks under $250 billion in assets from supervision which made it difficult for the San Francisco Fed to take the problem of SVB to the next level or to be able under the law passed during the 2009 financial crisis to regulate SVB and impose the Fed's requirements. A problem exists  of lobbying by banks for less regulation and the influence exerted on the US government and even the Fed. Spreading of ideas that a culture of laissez fairre or little regulation works well for the banking system contrary to evidence from the 2009 financial crisis and the mismanagement of banks such as Credit Suisse, Goldman Sachs, with frequent or egregious behaviour leading to settlements with the government. All it takes is the failure of one significant bank even if it is not a large bank, and the spiralling effects on banks with weakness of some kind for a crisis of confidence in the banking system. The role of lobbying by SVB bank and its CEO's appointment to the board of San Francisco Fed is seen as part of this self serving culture. ...

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Sheila Bair releases her new book in Sept 2012 on the financial crisis of 2008-2009 and the efforts to introduce financial reforms for a safer financial system: "Bull By the Horns: Fighting to Save Main Street from Wall Street and Wall Street from Itself." She is particularly critical of U.S. Treasury Secretary, and former head of the New York Federal Reserve, Timothy Geithner, as protecting the interests of Citigroup and Wall Street in his position as Treasury Secretary of the U.S. government. She describes in detail the situations in which Geithner tried to water down essential reforms to the financial system to make it safer, including the Volcker Rule. Of particular concern is the revolving door by which banking regulators or government officials join banks after service in the government which leads to weakening of regulatory and government oversight and systemic risks as in 2008-2009. Sheila Bair is widely respected for her efforts during the financial crisis from 2008 to 2011, when she headed the Federal Deposit Insurance Corporation, the FDIC. Her active involvement in defending reforms and setting up the system by which financially failing banks could be taken over and unwound without risks to the U.S. financial system are lasting contributions. She also succeeded as a manager by setting up an experienced and effective successor in Martin Gruenberg as head of the FDIC, to continue this work. A former Congresswoman, she describes herself as a Republican populist from Kansas. Her current role is as senior advisor to the Pew Charitable Trusts, which itself is a rare phenomenon today for a senior government official leaving government....

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With the U.S. Federal Reserve pulling back from its monetary easing policy and the ECB holding steady with a low interest rate policy, bond investors are finding attractive buys for government bonds of Italy and Spain. 10 year government bonds of Italy yielded 4.2%, and Spain's government bonds yielded 4.3% on Aug. 22, 2013. By comparison German government bonds yielded 1.88%, narrowing the gap between the bonds of southern European countries and German bonds as the eurozone economies recover in 2013-2014.

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The number of student loan borrowers in the U.S with loans over $100,000 has surged from about 1 million in 2010 to 1.82 million in 2014, according to the Federal Reserve Bank of New York. Th borrowers are graduate students who have piled up so much debt in the last decade that 40% of student debt of $1.19 trillion in 2015 is from graduate student debt. A major problem is that there are no limits to graduate student borrowing and the rates are higher because of bad loans in the system, increasing the size of the burden of student debt on individual borrowers rapidly, ironically at a time of low interest rates. This leaves borrowers worse off with unpayable student debt affecting them all their lives, taxpayers paying more, prudent student loan borrowers paying higher rates, and all the time reducing the pressure on universities and colleges to reduce costs for affordable graduate education. This is now a major problem in the U.S. and a major issue in the 2016 presidential election.

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Alan Meltzer is a respected voice on US Federal Reserve policies since the time Paul Volcker was Fed chairman He says the Bernanke Fed is making some serious policy mistakes. The first is concentrating on near term events, such as business response to Obama administration policies, over which it has little influence, while neglecting the long term consequences of its policies. The second is its effort to tackle unemployment by interpreting its mandate as a dual mandate of tackling both unemployment and inflation. By tackling one at a time, he says, the Fed is likely to fail totally. The US is unlikely to not feel the inflation that is going on around the world. By ignoring the changes in money supply growth the Fed is making another mistake. His advice is for the Fed to increase interest rates it controls to 1%, to signal that it is aware of inflation risks. Second, the Fed should annonce a specific, detailed plan explaining how it will reduce $900 billon of the $1 trillion banks continue to hold in excess of the legally required reserves. Third, the Fed should end QE II, the most recent round of treasury bond purchases. Meltzer says if the Fed waited for two more months in Nov 2010, it would have found that a double dip recession was not about to occcur and it could have held off from pursuing QE II. Meltzer emphasizes that slow growth and unemployment is not a monetary problem, because of the ample liquidity already in the financial system. Uncertainty about government policy and the future direction has been clarified by the election which will help put the economy back on track. Philadelphia Fed chairman expresses similiar views in other articles and an interview with O'Grady of WSJ....

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A report from the U.S. Federal Reserve on the impact of the financial crisis of 2008-2009 on the wealth of American households. Between 2007 and 2010 says the report the median net worth of American families went down by 39%, from $126,400 in 2007 to $77,300 in 2010. This had the result of putting Americans back to the level of net worth in 1992. Much of the loss in net worth was from asset value reductions. The median value of stock market based retirement accounts decreased by 7% to $44,000. The biggest drop was in housing values- falling by 42% to $55,000 in the three years. Americans are working down their debt- a quarter of families are debt free, credit card balances declined 16% to $2600 from $3100 from the period 2007 to 2010 of the report. Yet the median level of family debt remains the same as more families support their kids education by taking out college loans. Median income fell about 8% to $45,800 in 2010, with income losses especially large in the manufacturing industries as the U.S. manufacturing sector worked to improve competitiveness. Other factors supplement this picture. The burden of college loans increased to over $1 trillion for middle and working class families. With the burden of college debt young people were more likely to delay buying first homes, indefinitely dealying recovery in the housing market. Seniors on retirement see interest income from savings negligible with low interest rates and higher risk in a volatile stock market. ...