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What did the Federal Reserve miss that contributed to today’s crisis? “That financial deregulation still facilitates the creation of debt because it spurs competition and reinforces the drive for new markets and enlarged market standing. Monetary policymakers neither anticipated these realities, nor incorporated them into its policy calculations,” Henry Kaufman, the former Salomon Brothers economist, now president of Henry Kaufman & Co, told a conference today sponsored by the Levy Economics Institute of Bard College.
“The Federal Reserve also failed to grasp early (or, with sufficient clarity, later on) the significance of financial innovations that, by their very nature, facilitate the creation of new credit — innovations that could not have been financed at all using earlier techniques. Perhaps the most far-reaching of these innovations was the securitization of non-marketable obligations. This tended to create the illusion that credit risk could be reduced if the instruments become marketable,” Kaufman said.
“Moreover, elaborate new techniques employed in securitization (such as credit guarantees and insurance) blurred credit risks and — from my perspective many years ago — raised the vexing question, “Who is the real guardian of credit?” Instead of addressing these issues, the Federal Reserve actually was highly supportive of securitization. Alan Greenspan, when he was Fed Chairman, stated that securitization was very beneficial because it helped spread risk over a broader spectrum of the financial markets.”
“One of the Federal Reserve’s biggest blind spots when it comes to structural changes has been its failure to recognize the problems that huge financial conglomerates would pose for financial stability — including their key role in the current debt overload,” he added.
couldnt recognize a credit bubble in advance, though knew what to do when one burst.
Exactly kit. In fact that's another reason all the biggies have lobbyists- to make sure that the regulations they do have to put up with hamper competition as much as possible.
From Henry Kaufman
What did the Federal Reserve miss that contributed to todays crisis? That financial deregulation still facilitates the creation of debt because it spurs competition and reinforces the drive for new markets and enlarged market standing. Monetary policymakers neither anticipated these realities, nor incorporated them into its policy calculations, Henry Kaufman, the former Salomon Brothers economist, now president of Henry Kaufman & Co, told a conference today sponsored by the Levy Economics Institute of Bard College.
The Federal Reserve also failed to grasp early (or, with sufficient clarity, later on) the significance of financial innovations that, by their very nature, facilitate the creation of new credit innovations that could not have been financed at all using earlier techniques. Perhaps the most far-reaching of these innovations was the securitization of non-marketable obligations. This tended to create the illusion that credit risk could be reduced if the instruments become marketable, Kaufman said.
Moreover, elaborate new techniques employed in securitization (such as credit guarantees and insurance) blurred credit risks and from my perspective many years ago raised the vexing question, Who is the real guardian of credit? Instead of addressing these issues, the Federal Reserve actually was highly supportive of securitization. Alan Greenspan, when he was Fed Chairman, stated that securitization was very beneficial because it helped spread risk over a broader spectrum of the financial markets.
One of the Federal Reserves biggest blind spots when it comes to structural changes has been its failure to recognize the problems that huge financial conglomerates would pose for financial stability including their key role in the current debt overload, he added.
Henry Kaufman: What the Fed Missed - Real Time Economics - WSJ
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Regulation just means it's harder for small business to get started, get going, and stay strong. It drives the costs of licensing up and increases the red tape. It's not as good an idea as people think, it only looks good if you ignore most of it's effects, if you know more of the effects you will see it's a bad idea. Actually, it is part of the reason so much of our economy has become dependent on only a few companies, thus why when one of those companies fails ... it hurts.
Regulation just means it's harder for small business to get started, get going, and stay strong. It drives the costs of licensing up and increases the red tape. It's not as good an idea as people think, it only looks good if you ignore most of it's effects, if you know more of the effects you will see it's a bad idea. Actually, it is part of the reason so much of our economy has become dependent on only a few companies, thus why when one of those companies fails ... it hurts.
From Henry Kaufman
What did the Federal Reserve miss that contributed to todays crisis? That financial deregulation still facilitates the creation of debt because it spurs competition and reinforces the drive for new markets and enlarged market standing. Monetary policymakers neither anticipated these realities, nor incorporated them into its policy calculations, Henry Kaufman, the former Salomon Brothers economist, now president of Henry Kaufman & Co, told a conference today sponsored by the Levy Economics Institute of Bard College.
The Federal Reserve also failed to grasp early (or, with sufficient clarity, later on) the significance of financial innovations that, by their very nature, facilitate the creation of new credit innovations that could not have been financed at all using earlier techniques. Perhaps the most far-reaching of these innovations was the securitization of non-marketable obligations. This tended to create the illusion that credit risk could be reduced if the instruments become marketable, Kaufman said.
Moreover, elaborate new techniques employed in securitization (such as credit guarantees and insurance) blurred credit risks and from my perspective many years ago raised the vexing question, Who is the real guardian of credit? Instead of addressing these issues, the Federal Reserve actually was highly supportive of securitization. Alan Greenspan, when he was Fed Chairman, stated that securitization was very beneficial because it helped spread risk over a broader spectrum of the financial markets.
One of the Federal Reserves biggest blind spots when it comes to structural changes has been its failure to recognize the problems that huge financial conglomerates would pose for financial stability including their key role in the current debt overload, he added.
Henry Kaufman: What the Fed Missed - Real Time Economics - WSJ
Please Follow Copyright Guidelines
We need to abolish the Federal Reserve. Take it back from the rich bankers that own it. Yes, OWN it. Some of them aren't even American. In 1913 Rockafellor, JP Morgan & couple other rich dudes bribed congress to let them take over the Federal Reserve. Today its a QUASI private/governmental org. But no one knows exactly how much power the private bankers actually have in making decisions. I remember last year the Fed Res. gave AIG the first bailout without even going through Congress. That's too much power.
Um 1935, 1937, 1946, 1960-61? The only things driving the economy thoughout the fifties was a housing boom that laid the foundation for the current crisis as more Americans than ever before moved from inner city Apartments to the suburbs, and defense spending which at that time was about 70% or more of the federal budget.
From Henry Kaufman
Henry Kaufman: What the Fed Missed - Real Time Economics - WSJ
Please Follow Copyright Guidelines
We need to abolish the Federal Reserve. Take it back from the rich bankers that own it. Yes, OWN it. Some of them aren't even American. In 1913 Rockafellor, JP Morgan & couple other rich dudes bribed congress to let them take over the Federal Reserve. Today its a QUASI private/governmental org. But no one knows exactly how much power the private bankers actually have in making decisions. I remember last year the Fed Res. gave AIG the first bailout without even going through Congress. That's too much power.
If anyone one is interested, we recently had a thread called "Kill the Fed" in which much of this nonsense was shown false. I'll pass on regurgitating it here.
Um 1935, 1937, 1946, 1960-61? The only things driving the economy thoughout the fifties was a housing boom that laid the foundation for the current crisis as more Americans than ever before moved from inner city Apartments to the suburbs, and defense spending which at that time was about 70% or more of the federal budget.
And in those years we had Glass Steagal which protected us against these markets getting overheated and creating a depression.
Now that its gone it turned into this mess instead of being just a recession.
This country has had a boom bust economy every 15 years or so right from the begining.
Once Glass Steagal was in place we went through 70 or so years with only recessions and no huge Boom and Busts.
Once it was gone what happend?
It started to be unraveled and the size of the messes just grew from the Savings and loans debacle, Enron and now this meltdown.
Its is all about lack of regulations folks
Um 1935, 1937, 1946, 1960-61? The only things driving the economy thoughout the fifties was a housing boom that laid the foundation for the current crisis as more Americans than ever before moved from inner city Apartments to the suburbs, and defense spending which at that time was about 70% or more of the federal budget.
And in those years we had Glass Steagal which protected us against these markets getting overheated and creating a depression.
Now that its gone it turned into this mess instead of being just a recession.
Elizabeth Warren is overseeing the TARP funds. She explained it best on the Daily Show.
Before the Great Depression, our economy went like a roller coaster ride every 10 years. (Good luck with this if you have a 401K). So they put in Regulations and we had a good 50 years of slow steady growth, but no crashes or major problems. Then Reagan got in, and he removed regulations, and then the S&L collapse of the 80's came and then we find out Enron is cooking the books in 2001 until the entire thing collapsed.
She's not giving you an opinion. She's telling you the facts on what happened. And she explained it like any moron could understand.
So truth, why don't these moron's get it?
And in those years we had Glass Steagal which protected us against these markets getting overheated and creating a depression.
Now that its gone it turned into this mess instead of being just a recession.
Elizabeth Warren is overseeing the TARP funds. She explained it best on the Daily Show.
Before the Great Depression, our economy went like a roller coaster ride every 10 years. (Good luck with this if you have a 401K). So they put in Regulations and we had a good 50 years of slow steady growth, but no crashes or major problems. Then Reagan got in, and he removed regulations, and then the S&L collapse of the 80's came and then we find out Enron is cooking the books in 2001 until the entire thing collapsed.
She's not giving you an opinion. She's telling you the facts on what happened. And she explained it like any moron could understand.
So truth, why don't these moron's get it?
I think Glass-Segal was repealed during the Clinton administration, with bi-partisan support of both parties.
