Hedging Against Big Ben ">
Nov-03-2009TREASURIES-Prices turn lower, pre-Fed positioning cited
(topic overview)
CONTENTS:- At the sessions, Fed regulators told leaders of 28 of the largest financial firms that the central bank was serious about enforcing the executive pay guidelines it proposed late last month. (More...)
- The call for a speedy implementation of the proposals underlines the Fed's desire to change Wall Street's pay practices and stave off a public backlash ahead of what promises to be a bumper bonus season at many banks. (More...)
- Interest-rate markets, from Treasurys to swaps and futures, can be counted on to overshoot the Fed's first move, even in a relatively transparent tightening cycle. (More...)
- The compensation review, part of a broader proposal the Fed released last month, targets executives, traders and other employees at the 28 largest financial institutions. (For smaller institutions, compensation oversight will be added to regular safety and soundness examinations.) (More...)
- Market analysts on Wednesday will put the Fed's Federal Open Market Committee's statement under a microscope. (More...)
- Economists underscored that inflation continued to be tame amid the fragile recovery, well within the Fed's comfort zone. (More...)
- The Fed often waits at least several months after unemployment, a lagging indicator of recovery, peaks before beginning to raise rates. (More...)
- The latest results of the largest banks show old bad habits disproportionate trading and risk taking in financial markets are back with a vengeance. (More...)
- Many of the banks aren't expected to push back aggressively against the proposal, in part because it stops short of direct caps on pay. (More...)
- Supporting Treasuries were the U.S. Treasury's lower projected borrowing need in the first fiscal quarter than forecast and an overnight rate increase in Australia that weighed on equities in Asia and Europe, analysts said. (More...)
SOURCESFIND OUT MORE ON THIS SUBJECTAt the sessions, Fed regulators told leaders of 28 of the largest financial firms that the central bank was serious about enforcing the executive pay guidelines it proposed late last month. At the Fed's request, the bank executives were accompanied by members of their boards' compensation committees. At one of the meetings, in New York, William C. Dudley, president of the Federal Reserve Bank of New York, told Goldman Sachs Group Inc. Chief Executive Lloyd Blankfein, JPMorgan Chase & Co. Chief Executive Jamie Dimon, Morgan Stanley Chief Executive John Mack and others that he wanted the banks to begin incorporating the new practices as they set year-end bonuses in the coming months -- even though the rules have not yet been finalized. Regulators stressed that the Fed was not looking to cap overall pay but instead wanted the banks to structure bonuses in ways that do not encourage excessive risk taking, according to more than half a dozen people who attended the meetings or were briefed on them. Fed officials urged the banks to do more to align pay with long-term performance, such as by awarding a significant portion of pay in stock, these people said. Dudley told the executives that he expected the guidelines to be formalized by year's end. After the New York session, executives at three of the banks said that nothing they had heard raised alarms.
[1] WASHINGTON -- Federal Reserve officials told top bankers Monday they should start overhauling their employees' pay packages as soon as possible, even before the Fed finalizes its proposed compensation rules. During meetings and conference calls across the U.S., Fed officials told executives from top financial institutions they needed to immediately determine whether their compensation structures were consistent with an October proposal from the central bank aimed at curbing some bonuses. Fed officials told the bankers, who represent the country's 28 top foreign and domestic firms, that the companies must turn over by Feb. 1 a list of the changes they planned to make to align their pay structures with the Fed's plan. The Fed is urging banks to consider the proposal as they weigh 2009 bonuses.
[2] WASHINGTON/NEW YORK, Nov 2 (Reuters) - The U.S. Federal Reserve summoned chief executives from the United States' biggest banks on Monday to prod them toward reining in pay practices blamed for sparking the financial crisis. In meetings across the country with the 28 largest U.S. banks, Fed officials laid out their expectations for bank-led changes to tailor compensation more closely to risk taking.
[3] WASHINGTON (Reuters) - Federal Reserve officials meeting this week must weigh improving economic data against the risk, reinforced by a persistently weak job market, that a burgeoning recovery remains on shaky ground. A 3.5 percent annualized jump in third quarter gross domestic product revived debate between analysts who believe a sustainable turnaround is under way, and those who think growth will falter once a heavy dose of stimulus fades. The uncertainty is evident within the Fed itself, with many policymakers emphasizing the hazards in their outlook, even as they vow to vigorously fight any early signs of inflation. With inflationary warning signals largely absent, an immediate shift in the central bank's ultra-easy policy stance, including any tinkering with its pledge to keep interest rates low for an "extended period," appears unlikely. "The Federal Reserve is unlikely to change its assessment significantly," said Marc Chandler, global currency strategist at Brown Brothers Harriman.
[4] NEW YORK (Reuters) - The U.S. economy may have turned a corner after the deepest recession in some 70 years, but Federal Reserve policymakers appear to be in no rush to raise interest rates. The Fed is widely expected to keep its benchmark interest rate where it has been since December -- near zero -- when it meets this week. With underlying inflation pressures actually decreasing and most Fed officials expecting the recovery to be slow, there is little incentive for the Fed to change its easy money policy.
[5] NEW YORK, Nov 2 (Reuters) - Nearby U.S. short-term interest rates futures were unchanged to higher on Monday, suggesting traders anticipate the Federal Reserve will leave its near-zero rate policy alone well into 2010. This view of a protracted easy Fed policy has come even as data show the U.S. economy is emerging from the worst downturn in 70 years.
[6] The latest "Fed fake" is a newswire story about Michael Woodford, a member of the Monetary Policy Advisory Panel for the Federal Reserve Bank of New York. Asked if the Fed will soon drop its promise to keep rates low for an "extended period," he responded: "I could imagine them dropping the language." He went on to explain that "the problem with this kind of language is that it's perceived as making a promise about future interest rates independently of what happens in the meantime."
[7] The answer in our view is almost certainly "no." It is important to understand how the
Bernanke Fed signals major policy changes. The signals don't come from Reserve Bank presidents or advisers; they come from either the overall committee--in the form of the official statements--or from the core of the committee--that means Bernanke, Kohn, and to a lesser extent New York Fed President Dudley. The Advisory Panel plays a very secondary role in thinking at the Fed. When I was at the Federal Reserve Bank of New York, we had to brief the advisory group before they talked so they were up to speed on the data.
[7] NEW YORK, Nov 2 (Reuters) - The Federal Reserve Bank of New York huddled with leaders of about 20 major banks on Monday to discuss proposed rules designed to tie pay to performance and curb excessive risk-taking, sources familiar with the meeting said. The Fed told the bank executives it is serious about its executive compensation rules and wants banks to begin incorporating them in year-end compensation plans, the sources said. William Dudley, the head of the New York Fed, participated in the meeting, telling the executives they must figure out how to compensate risk-takers while being disciplined on compensation, a source said. The Fed also asked for feedback on its proposed rules. Bank CEOs, who were on hand for the half-hour meeting with members of their compensation committees, also had opportunities to ask questions or offer comments.
[8] NEW YORK, Nov 2 (Reuters) - Morgan Stanley ( MS.N ) chief executive John Mack stressed during a meeting with the New York Federal Reserve the need for global coordination among regulators as it relates to executive pay, sources familiar with the matter said. About 20 banks participated in the half-hour meeting at the New York Fed where they were briefed on recently proposed pay rules.
[9] THE FEDERAL RESERVE got tough with U.S. banks over pay yesterday, telling them to curb bonuses this year, even though stricter rules do not come into force until 2010. In half-hour meetings at regional offices held across the country, the Fed told bank bosses it expected them to follow the broad principles of the new rules - aligning compensation with risk and avoiding pay structures that foster short-term decisions by traders - for pay covering 2009.
[10] The Fed stressed that banks would be expected to comply with the broad principles of the new rules - aligning compensation with risk and avoiding pay structures that foster short-term decisions by traders - in 2009, bankers said. Officials said that, for this year, banks should abide by the proposed rules "whenever possible" - a sign that regulators do not expect financial groups to tear up contracts or renege on promises of guaranteed bonuses made in previous years. Bankers who were at the meetings said the Fed's message was clear: practices that contradict the spirit of the new rules will not be tolerated this year even though the final version of the guidelines will not be available until December. "They told us in no uncertain terms to look at our pay practices for this year and make sure they comply," said a senior banker who was at the meeting.
[11] Bankers from the nation'''s 28 largest banks were called to regional Federal Reserve offices across the country today to get a message from the agency. That message was that they should not wait for new guidelines that will align banker pay with risk. They should guess what the guidelines will be and apply them to 2009 pay packages. Bankers have not been very good at being bankers for the last two years and asking them to be clairvoyants as well seems too much. The Fed is in a rush to prove that it can have a meaningful role in permanently changing the financial industry infrastructure that it believes brought the credit market to its knees. The Treasury has started its own process along those lines, at least in the compensation arena, by bringing in a pay czar to set limits on compensation at firms which have not repaid TARP money.
[12] Listen to any speech from a Federal Reserve Board official and at some point, they are almost certain to preach the virtues of greater transparency -- both in financial markets and at the central bank itself. The findings from the Fed's latest "horizontal review" of industry practices -- this time, focusing on compensation -- will not be made public. Citing the confidential nature of supervision, the Fed said it would not release the results of its review. That is a departure from earlier this year when the Fed laid bare the capital positions of the 19 largest banks, and markets rallied amid the newfound clarity. Cornelius Hurley, a former Fed lawyer who directs the Morin Center on Banking and Financial Law at the Boston University School of Law, said that by releasing those stress-test results the Fed made it possible to ask why any supervisory activity is not subject to sunlight. "They opened up the old question of whether the whole supervisory process should be transparent," Hurley said.
[13] The Federal Reserve has told 28 major banks that draft pay guidelines will have to be followed in this year'''s bonus payments, Financial Times reports. The rules do not officially come into effect until 2010, but the Fed has signaled its desire for a speedy implementation of the proposals.
[14] The Federal Reserve told chief executives of the 28 top U.S. banks on Monday to adopt draft pay guidelines for this year'''s round of bonus payments, even though the rules do not officially come into force until 2010. The move underlines the Fed'''s desire to stave off a public backlash ahead of what promises to be a bumper bonus season at many banks and comes just as financial institutions are deciding how to apportion their 2009 bonus pool to star bankers and traders. This entry was posted by Gwen Robinson on Tuesday, November 3rd, 2009 at 4:55 and is filed under
Capital markets.
[15] WASHINGTON (Reuters) - The U.S. Federal Reserve is communicating to large banks its expectations and plans for rules to tailor pay for executives and key employees to risk, Fed Reserve Governor Daniel Tarullo said on Monday.
[16] WASHINGTON, Oct 30 (Reuters) - U.S. Federal Reserve officials are scheduled to meet with bank executives on Monday to discuss executive pay at large financial firms, a Fed spokesperson said on Friday. They would discuss "the process for the reviews of incentive compensation arrangements at the large, complex banking organizations", the spokesperson said.
[17] The Federal Reserve is working to ensure that compensation appropriately be rewards to longer term performance and do not create undue risk to the firm or the financial system." At this point, the guidelines are a bit of nice rhetoric. We'll need to stand by for some hard numbers on bank pay and bonuses so see if the Fed means business or is just papering over this whole issue.
[18] WASHINGTON — The Federal Reserve is gathering the heads of the largest banks it supervises Monday to discuss its proposal to limit incentive pay and bonuses to promote financial stability, a Fed official said.
[19] WASHINGTON — The U.S. Federal Reserve is unlikely to raise key interest rates this week or unwind emergency support as the economy starts a tough recovery from recession, analysts say. Fed policymakers were expected to hold the base lending rate at near-zero and maintain a trillion-plus dollar program to underpin the recovery at the conclusion of their two-day meeting Wednesday.
[20] Disagreement over rates Even with the Federal Reserve expected to leave interest rates at a record low this week to nurture the fragile recovery, fissures are growing among policymakers about when to start boosting rates to head off inflation. A shift to higher borrowing costs is probably months away, and Fed Chairman Ben Bernanke has made clear that he's in no rush to boost rates and reel in the unprecedented amount of money the Fed has plowed into the economy. Other Fed policymakers have suggested that rates might have to go up sooner rather than later. "If policymakers insist on waiting until the level of real activity has plainly and substantially returned to normal -- and the economy has returned to self-sustaining trend growth -- they will almost certainly have waited too long," Fed Gov. Kevin Warsh said in a speech days after the Fed's Sept. 22-23 meeting.
[21] WASHINGTON — Even with the Federal Reserve widely expected to leave interest rates at a record low this week to nurture the fragile recovery, fissures are growing among policymakers about when to start boosting rates to head off inflation. A shift to higher borrowing costs is probably months away, but Fed Chairman Ben Bernanke and his colleagues likely will privately debate how best to signal a change in stance to investors, businesses and ordinary Americans when they open a two-day meeting Tuesday. At its last meeting in late September, the Fed opted to stretch out into early next year a key program aimed at forcing down mortgage rates. It isn't expected to veer from that course this week.
[22] "The common belief right now is that the economy will move forward in the fourth quarter, but probably at a little slower pace than in the third quarter." Financial markets are bracing for a possible change of wording in the Federal Open Market Committee's statement, expected on Wednesday at the end of its two-day meeting, that could hint interest rates are headed higher late next year. That, and any hint the Fed may start to pull back some of the liquidity it has been providing to markets through its debt purchases, could hurt stocks. "If you got language along those lines that suggested that they could be raising maybe a little bit earlier than what folks were expecting, then yes, I would expect the market to sell off on that news," said Thomas Wilson, a managing director in the institutional investments and private client group at Brinker Capital in Berwyn, Pennsylvania.
[23] The Federal Reserve'''s Open Market Committee, the group that decides economic
interest rate policy, meets today to discuss the economy, inflation, unemployment, toxic balance sheets and maybe even the ability of leprechauns to locate gold. Hey, why not? If there was ever a need for a '''kitchen sink''' mentality from the Fed, this is it. That'''s because policy makers have a lot to mull over these days.
[24] ON HALLOWEEN, some kids dressed as Ben Bernanke, the chairman of the Federal Reserve, and asked for euros or gold instead of candy. This was pretty funny stuff for grown-ups worried about a weak dollar and the effects of the Fed lowering interest rates to almost nothing to help the U.S. economy stabilize from the credit crisis.
[25] CHICAGO (Dow Jones)--Some of the most actively traded U.S. interest rate futures contracts sustained only moderate price declines Monday even though a batch of data provided evidence that the economy is recovering from its worst crisis since the Great Depression. Lower prices equate to higher expected rates, but uncertainty about Federal Reserve action later this week kept the market in limbo.
[26] Trick or treat has passed for kids, but it begins today for grown-ups. The Federal Reserve's interest-rate setting committee gathers today, and updates the world at 2:15 p.m. Eastern time Wednesday on its latest thinking on interest rates and economic conditions. The European Central Bank, and Bank of England also meet this week.
[25] A Fed staff projection used by policymakers at the September 22-23 FOMC meeting showed unemployment holding as high as 9.25 percent by the end of 2010 and then falling to about 8.0 percent by the end of 2011. Moody's Brusuelas predicted the FOMC statement would conclude that conditions will likely "warrant exceptionally low levels of the federal funds rate for an extended period," a phrase he noted had been in every statement since March. "But the Fed may be ready to tweak it soon, which would be significant," he said. "We will be watching to see if the Fed adjusts its commitment to keeping rates low for an 'extended period,' which may signal the central bank will remove some monetary stimulus earlier than anticipated." Such a minor change to the Fed policy outlook could provide support to the depreciating dollar, while appeasing inflation hawks, he said. Some central banks have begun raising interest rates, such as Australia and Norway in October, putting additional pressure on the dollar. "So far, I am reluctant to assume that the Fed will raise policy rates in response to this pressure.
[20] There are two reasons why the Fed, or any other central bank, should not act as a quasi-fiscal branch of the government, other than paying to the Treasury in taxes the profits it makes in the pursuit of its mandated macroeconomic stability objectives (maximum employment, stable prices and moderate long-term interest rates in the case of the Fed) and its appropriate financial stability objectives.'' The appropriate financial stability objectives of the central bank are those that involve providing liquidity, at a cost covering the central bank's opportunity cost of non-monetary financing, to illiquid but solvent financial institutions. Any action going beyond that, such as the recapitalisation of insolvent banks through quasi-fiscal subsidies, ought to be funded by the Treasury.''
[27] The Fed's claims on the private sector are valued in ways that cannot be verified.'' It is true that central banks can be expected to make a profit on their lender-of-last-resort loans to solvent but illiquid counterparties.'' There is a wide gap between the liquidation value of the assets offered as collateral in times of stress and the present value of their held-to-maturity cash-flows.'' Central banks can and do exploit this situation to charge effective interest rates that are not just above the risk-free rate, but also at times above the default-risk adjusted opportunity cost of non-monetary funds to the central bank.'' It is good to know that when liquidity is scarce, the source of ultimate liquidity knows how to make a profit.'' This profit has no bearing on the question as to which counterparties benefited from quasi-fiscal subsidies from the Fed and from other central banks and in what amount. It is not just the aggregate or net quasi-fiscal subsidy of the central bank that matters.''
[27] Requests to make public either the pricing models or the actual valuations of all illiquid private securities offered as collateral have been systematically stonewalled by the central banks.'' That makes it impossible for external assessors to determine whether an ex-ante subsidy was involved in the terms and conditions of the loans. The Fed went well beyond even this.'' In its bail-out of AIG, it refused for a long time to reveal who the counterparties of AIG were that were made whole because of the Fed's emergency loans to AIG.'' Exiting from unconventional monetary policy means revealing the true extent of the quasi-fiscal transfers handed out and quasi-fiscal taxes imposed by the central banks in their financial operations.''
[27] The Bank of England and the Fed now also accept private securities as collateral in repos at the discount window and at many of the special facilities that were created to resolve the crisis.'' None of these loans by the central banks to private entities and collateralised against private securities are guaranteed by the national Treasuries.
[27] What makes the problem worse is that all the leading central banks are not just faced with the possibility that, having made a properly priced collateralised loan to a private counterparty, a bad state of the world is realised, the counterparty goes broke and the collateral turns out to be impaired also.'' When such a double default occurs, the central bank acts in an ex-post quasi-fiscal capacity if there is no full Treasury guarantee or indemnity. There are good grounds for suspecting that many of these loans were not even priced properly ex ante to reflect the associated credit risk, but were instead handed out on terms that implied an ex-ante quasi-fiscal subsidy.'' None of the three central banks, the Fed, the ECB or the Bank of England have been willing to reveal how they value illiquid collateral.''
[27] I also recognise that when a financial crisis threatens to engulf systemically important financial institutions, speed is of the essence and only the central bank can intervene with the necessary speed and on the necessary scale - assuming of course that it is domestic currency liquidity or default risk on domestic-currency-denominated securities that is at stake.'' The central bank should, when it exposes itself to potential private sector credit risk, only do so as an agent of the Treasury, and not for its own account. What this means is that whenever the central bank accepts private securities as collateral or purchases private securities outright, it always should do so with a full indemnity from the Treasury against losses due to credit risk.
[27] Then the Treasury provides the Bank of England with a full indemnity (guarantee) for any private securities purchased by the Bank up to that limit.'' That is the right way to separate fiscal policy from monetary and liquidity policy. The ECB, which is committed to buy a very limited number of private securities outright (it has set itself a limit of '''60 bn for covered bond purchases of which, as noted earlier, only '''20 bn has been used thus far), does not have such an indemnity from the 16 national Euro area fiscal authorities.'' The ECB therefore takes credit risk on these outright purchases.'' Even if this credit risk is priced appropriately ex-ante, the realisation of the risk could blow a hole in the balance sheet of the ECB and reduce its capital.'' This is not a problem with the current scale of the outright purchase programme, but it puts the camel's nose firmly in the tent. The Fed has been taking massive credit risk in its outright purchase programmes.''
[27] 
The call for a speedy implementation of the proposals underlines the Fed's desire to change Wall Street's pay practices and stave off a public backlash ahead of what promises to be a bumper bonus season at many banks. The timing of the Fed's move is important because it sets the tone on compensation just as financial institutions are deciding how to apportion their 2009 bonus pool to star bankers and traders. In meetings at the regional offices of the Fed, regulators told chief executives of the nation's 28 top banks that they had until February 1 to prepare an analysis of how their compensation practices met the guidelines, according to some of the attendees. The New York Fed meeting was attended by some of the world's most prominent bankers, including John Mack, chairman of Morgan Stanley, Vikram Pandit, Citigroup's chief executive, and U.S. representatives from European banks such as Credit Suisse and Deutsche Bank.
[11] "The signals don't'' come from Reserve Bank Presidents or advisers," Harris wrote in a note to clients. "They come from either the overall committee in the form of the official statements or from the core of the committee that means (Chairman Ben) Bernanke, (Vice Chairman Donald) Kohn, and to a lesser extend, New York President (William) Dudley." The Fed starts its two-day policy-setting meeting on Tuesday, and Harris is certainly not alone in thinking they'll stay the course, keeping benchmark interest rates near zero.
[28] Markets can adjust extremely fast, with the potential to upset a lot of positions. Chris Rupkey, chief economist at Bank of Tokyo-Mitsubishi in New York, noted that in June 2004, when the Fed first raised its target rate from the then-historic low of 1%, the three-month Eurodollar rate shot to 4.39%. That's 18 months before the Fed's rate got there, and two years before it peaked at 5.25%. That overshoot came despite possibly the most orderly and well-advertised tightening cycle in central-bank history, in which rates ratcheted up a quarter percentage point per meeting for two years. "It missed the Fed's final tightening move by, but on the other hand it did get priced in ahead of time," Rupkey said.
[29] Harris, a former Federal Reserve Bank of New York economist, said much of the recent hawkish commentary has come from presidents of the regional Fed banks, and that may not be indicative of the thinking on the Fed's board.
[28] Mr. Sack, 39 years old, is an economist who runs the markets group at the Federal Reserve Bank of New York.
[30] NEW YORK, Nov 3 (Reuters) - U.S. Treasuries prices rose on Tuesday, driven by weaker equity markets and investors' variable appetite for risk ahead of this week's Federal Reserve monetary policy meeting. Strategists said range-bound trade with little conviction would characterize activity before Wednesday's statement from the Federal Reserve at the conclusion of its two-day Federal Open Market Committee (FOMC) meeting.
[31] NEW YORK, Nov 2 (Reuters) - U.S. Treasuries expanded early losses on Monday when stronger-than-expected data on manufacturing, construction and home sales pushed stocks higher and dented demand for safe-haven U.S. government debt. The market reaction to the stronger-than-expected economic data was short-lived, however, because investors are looking ahead to other key data due this week and to what the Federal Reserve will say on Wednesday at the conclusion of the Federal Open Market Committee's two-day monetary policy meeting.
[32] NEW YORK, Nov 2 (Reuters) - U.S. Treasuries fell on Monday after stronger-than-expected data on manufacturing, construction and home sales spurred hopes of a solid economic recovery and dented demand for safe-haven U.S. debt. Losses were limited however, with many investors unwilling to take a strong position as they wait for the Federal Reserve to speak on Wednesday after its two-day monetary policy meeting and look ahead to Friday's October non-farm payrolls report.
[33] NEW YORK, Nov 3 (Reuters) - Prices of some U.S. Treasuries erased narrow gains and turned lower on Tuesday as traders positioned themselves for Wednesday's Treasury refunding announcement and a statement from the Federal Reserve on monetary policy.
[34] SINGAPORE: According to economists, the U.S. Federal Reserve is likely to retain its accommodative monetary policy stance up till at least the first half of 2010. They added that despite the U.S. economy posting its first positive GDP numbers in a year for the third quarter, other key indicators like consumer consumption and unemployment rate have not been faring as well.
[35] Government-supported spending on cars and homes pushed the U.S. economy's growth into positive territory at a 3.5 per cent annualised rate in the third quarter. While this is the best growth seen in two years, analysts said it will not be enough to sway the Federal Open Market Committee into changing its monetary policy stance. David Cohen, director of Asian Economic Forecasting, Action Economics, said: "That offered some encouragement that maybe the recession is finally ending. That is balanced by the fact that the unemployment rate is climbing higher. "Everyone is going to be watching this week's monthly report, likely to show further decline in payrolls, unemployment rate edging up to maybe 9.9 per cent.
[35] The Federal Open Market Committee, the U.S. central bank's policy-setting group, will meet on Tuesday and Wednesday. Monday's encouraging data on manufacturing and housing eased some worries that the U.S. economy could shrink again, but they were not robust enough to bolster optimism that growth will accelerate and more companies will hire again.
[6] The question of how to handle information collected through horizontal reviews is likely to intensify. Testifying Thursday before the House Financial Services Committee, Fed Gov. Daniel Tarullo said the central bank plans to increase its emphasis on such reviews, which compare various banks' practices on particular issues. Karen Shaw Petrou, the managing director of Federal Financial Analytics Inc., said, "It's a challenge the Fed has not fully reckoned with related to these horizontal reviews, not just for compensation but down the road for a full range of supervisory issues."
[13] The U.S. central bank hopes to prevent the type of reckless behavior that led the U.S. financial system to the brink of collapse last year. The Fed last month issued proposed guidelines on how the largest banks should reform their compensation practices, and Monday's encounters were meant to kick-start the process.
[3] Rep. Ron Paul, R-Texas, has spent much of the year pushing a bill that would open more of the central bank to an audit from the Government Accountability Office. That bill has attracted 308 sponsors in the House. The Fed has made tremendous strides in opening itself to the public and more clearly communicating the rationale behind its actions. The central bank now releases a monthly report detailing, among other things, how many borrowers use its liquidity facilities and the value of the collateral underlying the loans. When it comes to its study of pay packages, the Fed has only committed to issuing a report after 2010 on "trends and developments in compensation programs and processes."
[13] "Federal Reserve officials will be meeting with bank executives Monday to discuss the process for the reviews of incentive compensation arrangements at large, complex banking organizations," a central bank spokesman told AFP. On October 22 the Fed released recommendations calling for banks to ensure their compensation polices "do not undermine the safety and soundness of their organizations."
[19] March federal funds futures FFHO hit a contract high on Monday, suggesting traders see no chance the Fed will raise rates in the first quarter of 2010. The unprecedented rate policies adopted by the Fed, the Bank of England and the European Central Bank have resulted in ultra-low borrowing costs for banks, which have helped them to make money and repair their balance sheets.
[6] I see no problem at all with the size of the balance sheet per se.'' It is the logical consequence of the central bank, in a liquidity crisis, providing funding liquidity to systemically important financial entities (the lender-of-last-resort function) and market liquidity to markets for systemically important financial instruments (the market-maker-of-last-resort function). The problem is not the size of the balance sheet but the size of the quasi-fiscal transfers the Fed has made to some of its private counterparties in its myriad interventions since the crisis started. Let me start by restating that I believe there is no quasi-fiscal role for the Fed other than the one inherent in the pursuit of its macroeconomic objectives and of its legitimate financial stability objectives.''
[27] The Administration has floated several ideas which would take the Fed'''s mission well beyond what it has ever been by making it the '''financial regulator of all financial regulators.''' Bernanke has suggested that this umbrella role be handled by an oversight council and not his agency. It still seems that Congress believes that taking a number of crippled agencies that did nothing to stop the financial crisis and several large financial frauds and putting them together somehow makes the regulatory system stronger. The Fed'''s notice to bank executives that they need to tie pay to risk immediately and not wait for formal guidelines is another example of the government'''s belief that it is alright to usurp the role of corporate boards and compensation committees and the shareholders who elect them.
[12] The unusual meetings, according to the Washington Post,
also included members of board compensation committees. It's no secret what the Fed wants. It aims to use pay to limit some of the outsized risks that banks were all to willing to take on. They want better alignment of pay and long-term performance by using more stock in compensation plans. These concepts have been promoted for years. It took a crisis for real progress to be made.
[36] And, bank boards are, based on the catastrophe of the last year, almost certainly hyper-vigilant about bank risks. The Fed wants to undermine roles which boards are almost certain to do well on their own. The Fed has now told the big banks what they have to do as they pay their managers for 2009 performance. Many of the firms are likely to make public statements about their rights being trampled. All of them are likely to go along with the Fed'''s requests, even without new written rules. Bank boards can take the rest of the year off and simply collect their meeting fees. Fairly soon, there will be nothing more for them to do.
[12] Departing Bank of America Corp. CEO Kenneth Lewis wasn't on the call with the Richmond Fed, but other bank officials were. "We will certainly work with them and provide whatever information they require," said a Bank of America spokesman. White House and Fed officials argue that poorly designed pay packages were one cause of the financial crisis, because they misaligned incentives for bankers and encouraged employees to take too many risks. People familiar with the meetings didn't describe them as confrontational or combative.
[2] The Fed last week issued bank pay guidelines aimed at curbing the type of reckless risk taking officials say contributed to the financial crisis and nearly brought our economy to the point of collapse.
[18] "The markets will undoubtedly look beyond the actual interest rate announcement, and focus instead on the tone and wording of the actual communique," said Millan Mulraine, analyst at TD Bank Financial Group. "In this regard, we expect the economic outlook to remain largely intact, with the Fed reiterating the improved outlook for the U.S. economy, reflecting in part the encouraging tone in the recent economic reports, and in particular the policy-induced surge in GDP in Q3," he said.
[20] Most analysts at top U.S. banks expect the Fed's policy-setting Federal Open Market Committee to keep interest rates on hold until mid-2010 or later, though interest-rate futures markets are pricing in an increase earlier in 2010.
[5] At issue is whether more hawkish members of the Federal Open Market Committee, the Fed's policy arm, will manage to make the Fed statement slightly less dovish by removing the word "extended" from the Fed's current commitment to keep interest rates low for an extended period.
[33] Mostly, the Fed is not expected to increase interest rates from the current range of 0-0.25%, but the options market is already anticipating changes in the value of U.S. government bonds. Far out-out-of-the-money puts on the iShares 20+ Year Treasury Bond Fund (ticker: TLT), an exchange traded fund that invests 95% of its assets in long-term U.S. government bonds, has increased in value relative to at-the-money puts. This suggests that investors are worried that the price of the bonds will decline.
[25] Too liquidity has an interest rate risk in all but the shortest term assets. Therefore, a bank's liquidity could shrink with a rise in interest rates. With this heightened emphasis on liquidity, it is interesting that banks are holding only a composite $125B or about 1% of assets in treasuries. Barclays (
BCS ) says that the norm after recessions is for banks to hold an average 8.5% of assets in treasuries, giving them the capacity to hold up to $1T. Barclays believes that banks will jump in as the Fed has quit quantitative easing (monetizing the debt). This might be a stretch as the interest rate risk in treasuries is especially high and banks have used Fannie Mae (
FNM ) and Freddie Mac (
FRE ) debt as higher paying 0% risk weighted alternatives.
[37] In essence, returning money to the Fed for nearly free to forgo interest rate risk.
[37] "We had very strong data today which raises the risk that we might have a further sharp narrowing in the non-farm payroll job declines" said Josh Stiles, bond strategist at IDEAglobal in New York. "We have some risks in the Treasury market in that the (Federal Reserve) might tone down its statement a little bit," in terms of keeping interest rates at the current ultra-low level near zero for an extended period, Stiles said.
[33] The discussions, which were held in private, involved some of the top officials in finance, people familiar with the matter said. J.P. Morgan Chase & Co. Chief Executive James Dimon, Goldman Sachs Group Inc. CEO Lloyd Blankfein, Citigroup Inc. CEO Vikram Pandit and Morgan Stanley CEO John Mack attended a 30-minute meeting with Federal Reserve Bank of New York President William Dudley, these people said.
[2] Reporting from Washington and New York - The Federal Reserve on Monday gave Wall Street's top bankers a Feb. 1 deadline to submit proposals for how they plan to improve their pay practices, people with knowledge of the meetings said.
[1] NEW YORK (Reuters) - The U.S. economy has been kick-started into growth but stock investors still face an uncertain outlook as Wall Street gears up for comments from the Federal Reserve and a key report on employment this week.
[23] The federal reserve is nothing more than arrogant cabal of for profit at all costs bankers who could care less about unemployment and the economy. The government through its own inaction has allowed the federal reserve to abuse its authority, commit fraud, steal from the taxpayer, and to enter into illegal contracts/swaps/treaties with foreign central banks. It is a continual disgrace that the DIJ, FBI, Meida, and judicial system have colluded to keep the truth about the federal reserves' illicit activities from the american people.
[28] Professor of European Political Economy, London School of Economics and Political Science; former chief economist of the EBRD, former external member of the MPC; adviser to international organisations, governments, central banks and private financial institutions.
[27] The Fed has leeway to do so because inflation thus far has been low, economists said. Whenever the Fed decides to drop this "extended period" language, it will be taken as a signal that the central bank is preparing to reverse course.
[22] BofA Merrill''thinks it will be the European Central Bank that hikes before the Fed. "The bottom line is that faced with roughly the same economic backdrop very low core inflation, moderate headline inflation and a large but slowly closing output gap we expect the ECB to be more hawkish than the Fed," they wrote.
[28] Among top Fed officials a debate has broken out about how soon the central bank will need to act to nip inflation in the bud, although none are advocating a move now.
[5] Central banks don'''t have a redistributive mandate. That job should be left to the Treasury and the legislature. This encroachment of unelected technocrats on the domain of distributive politics is simply not acceptable in an open democratic society. That much of the redistribution effected by the Fed and other leading central banks is consciously hidden by the agency and kept under a cloak of secrecy in the name of counterparty confidentiality, market sensitivity or stigma effects makes it worse.
[27] The Fed and U.S. Treasury unveiled last month a set of curbs and rules for executive compensation at banks, aimed at reducing the excessive risk-taking that contributed to the global financial crisis.
[38] Lavish pay and bonuses at financial institutions are blamed for encouraging excessive risk taking that fueled the global credit crisis that brought the U.S. financial sector to the brink of collapse a year ago. The Fed proposed that its supervisors review 28 large, complex banking organizations to determine whether their policies are in line with its principles for risk-appropriate compensation incentives.
[19] The Fed last week issued bank pay guidelines aimed at curbing the type of reckless risk-taking officials say contributed to the crisis that nearly brought down the financial system last year. Fed Governor Daniel Tarullo told Congress this week that the Fed would supplement those recommendations with "supervisory initiatives to spur and monitor" industry reforms.
[17] When the banks were in trouble last year, the Fed pledged $11.2 trillion to bail out the financial industry. This $11.2 trillion is taxpayer money. The money was given to stabilize the banks and build up their capital base. Instead of doing this, they used the money to rack up big profits and are now paying themselves record bonuses.
Goldman Sachs Group (NYSE:
GS ) for example, set aside $16.7 billion, or 43% of earnings, for compensation and bonuses. What happened is that with the bank bailout, we've had the greatest transfer of wealth from the public sector to the private sector in this nation's history -- an unprecedented $11.2 trillion taxpayer dollars.
[39] The Fed'''s leverage with financial firms that do not owe the government money is a bit less certain. It not only has no specific pay guidelines for banks yet; it may not have any real right to set them.'' It would not be surprising if the matter ends up in federal courts at some point, but that does not help the banks now.
[12] In contrast to the Fed, the Treasury Department's pay czar, Kenneth Feinberg, did publicly release compensation levels for executives at firms that have received "exceptional" government assistance, including Bank of America Corp. and Citigroup Inc. But observers said the two moves differ. For one, Feinberg is focused on absolute pay versus a company's practices, and he is overseeing pay at firms that continue to benefit from the taxpayer's dime.
[13] The Fed last month issued guidelines on how the country's 28 largest banks should control pay for executives and key employees to curtail the kind of recklessness that contributed to the devastating financial crisis that hit in 2007.
[16] Releasing the compensation results could serve as a demonstration to the public that banks have learned lessons from the financial crisis and are making substantive reforms. "No matter how high the compensation is, it will restore some of the public's confidence," said Robert Gnaizda, of counsel to the Black Economic Council, who argued that banks could use the data to their advantage. "The banks ought to be arguing that releasing executive compensation is sensible because it's all fairly determined." Banks already cite the pay of their five highest-paid people in annual proxy statements filed with the Securities and Exchange Commission.
[13] Federal regulators, who have concluded that the financial crisis was caused in part by inappropriate pay practices on Wall Street, have held numerous discussions with large banks about restricting executive pay.
[1] Recent news Goldman Sachs Group Inc ( GS.N ) had set aside $16.8 billion for compensation, so soon after repaying $10 billion in taxpayer money, fueled concerns Wall Street was already returning to lavish pay practices commonplace before the financial crisis.
[3] The Federal Reserve has tried to remain remote from most of the political turmoil that has accompanied the financial crisis. It has that ability and that right because of the way that it is chartered and the role that the Fed chairman has played in the economic policy life of the country for decades. The Fed elected to reject its former position on top of Mount Olympus to help the mortals when it looked like the financial world might be destroyed.
[12] Warsh — a voting member of the Fed's interest-rate setting committee — doesn't have a reputation for being an "inflation hawk," but others in the "sooner-than-later camp" do. They include Richard Fisher, president of the Federal Reserve Bank of Dallas; Charles Plosser, president of the Federal Reserve Bank of Philadelphia; and Jeffrey Lacker, president of the Federal Reserve Bank of Richmond, who is a voting member this year on the Fed's interest-rate committee.
[22] The Federal Reserve kicks off its two-day meeting today without all the drama normally associated with the potential for a rate change. The Fed has held its key rate at 0 - 0.25 percent for nearly a year, and it is a near certainty that policymakers will leave the fed funds rate at its current level.
[40] Washington, Nov 02 2009 November 2, 2009 - Federal Reserve Governor Daniel Tarullo said that the Fed decided to employ principles rather than 'generally applicable rules' when drafting its executive compensation guidance released less than two weeks ago.
[41] The U.S. Federal Reserve's "extensive" review of executive compensation at the country's 28 largest banks will begin shortly, Federal Reserve Governor Daniel Tarullo said Monday.
[38] The Federal Reserve told big U.S. banks yesterday that draft pay guidelines aimed at curbing excessive risk-taking will have to be followed in this year's round of bonus payments, even though the rules do not officially come into force until 2010.
[11] Against the backdrop of heightened public criticism, The U.S. Federal Reserve is trying to encourage banks to take the first step in controlling excessive pay and bonuses.
Regulators have established broad guidelines for pay incentives and bonuses. They are quite loose and do not nail down any specifics.
[39] WASHINGTON (Dow Jones)--The sharp headwinds facing U.S. banks are far from over, a Federal Reserve official said Monday, suggesting the difficulties in the commercial and residential loan markets are far from over.
[42] At the same time Bernanke's Federal Reserve is telling banks to increase liquidity as the banks see little loan demand from qualified borrowers.
[37] Real Time Economics offers exclusive news, analysis and commentary on the economy, Federal Reserve policy and economics.
[29] The Federal Reserve pumped $1 trillion into the financial system during a year of harried efforts to rescue the economy.
[30] In a major policy shift, the U.S. Federal Reserve ended its purchase of $300 billion dollars of treasury securities.The purchase had the effect of pumping money into the banking system.
[43] The options could be anticipating that prices will decline because the Federal Reserve has just completed a $300 billion Treasury purchase program.
[25] Traders and analysts point to one factor as the cause: the Federal Reserve's efforts to flood the financial markets with dollars. They say the Fed has created an unusual environment where investors essentially have two choices -- hold onto dollars or buy.
[44] The group runs the Fed's trading, making it the bridge between the marble corridors of the Federal Reserve in Washington and the bustling trading floors of Wall Street.
[30] The Federal Reserve Board summoned the CEO of 28 top banks and gave them Feb. 1 deadline for submitting proposals about how they intend to better their pay practices, which have been excoriated as of late.
[36] Federal Reserve Governor Daniel Tarullo gave an example,
as noted by Reuters. Pay arrangements for senior executives were best balanced if they involved deferred pay, at least for several years, in some form of equity. This pay had to be tied to performance. This same arrangement would be less effective for mid- and lower- level employees.
[36] BofA Merrill''Lynch Global Research economist Ethan Harris thinks all the talk of a Federal Reserve rate hike is just that talk.
[28] Rising unemployment, cautious consumers, tight credit and troubles in the commercial real estate market are among the forces expected to weigh on the recovery going forward. Against that backdrop, most economists think the Fed on Wednesday will keep the target range for its bank lending rate at zero to 0.25 percent.
[22] "Anybody who expects major changes to the Fed's statement is likely to be disappointed," said Stephen Stanley, U.S. economist at RBS. Fed officials, who meet on Tuesday and Wednesday, could discuss how they will prepare markets for an eventual policy shift, but analysts say it is too soon for the Fed to even hint toward an exit by tweaking its pledge to keep rates extraordinarily low for an "extended period."
[5] We do not expect major changes in the FOMC statement. While officials are reportedly thinking about how they might eventually modify the language regarding future interest rates, a change at this meeting is quite unlikely. With the economy turning up, the markets are on high alert for rate hikes from the Fed. Every time an FOMC hawk says that "the Fed will need to raise rates sooner rather than later" or Fed staff talks to the Street about technical issues around its exit strategy, the chattering class gets excited.
[7] If the Fed thinks so, it should eventually raise interest rates to ward off inflation ''' that would raise CD rates in the process. If Fed officials view the '''recovery''' as a mirage, they'''ll likely stand pat for another quarter; anxious not to raise rates into a still-sluggish economy.
[24] Goldman Sachs (
GS ) and Citigroup were unable to float AEI, a former Enron power plant and natural gas pipeline operator, at any price. That is not good for IB fees and a sign of continuing trouble for private equity. The consumer business is getting tougher; credit card reforms and other consumer protections will soon start taking their toll on profits. The mortgage origination business could also begin to falter when the Fed starts easing its purchases of Fannie and Freddie securities, interest rates climb and the pool of qualified home buyers shrinks.
[37] At the Fed's meeting in August, policymakers agreed to gradually slow the pace of another program to buy $300 billion in Treasury securities. It decided to shut that program down at the end of October, a month later than previously scheduled. That program is designed to force rates down for mortgages and other consumer debt to get Americans to spend more.
[22] "Prices initially fell on the stronger-than-expected ISM construction and pending sales figures but quickly rebounded," Canavan said. He said the market was focused on economic data yet to come this week, including non-farm payrolls on Friday, and details of the Treasury's fourth-quarter refinancing, to be announced later on Monday, and on the Fed's policy meeting.
[32] Exiting from unconventional monetary policy will assist a fuller revelation of the exact nature of the quasi-fiscal actions of the Fed (and to a more limited extent the ECB and the Bank of England). The political benefits from the cleaning of the stables that will, I hope, result from this, will in my view dwarf the economic significance of a successful exit strategy. That is incorrect.'' The haircuts are supposed to apply to the price or valuation of the security, not to its notional or face value.''
[27] The Fed's proposed rules, which won't be finalized until year's end, aim to prohibit banks from awarding incentives that drive traders, loan officers and others to take excessive risks that could threaten the bank's health.
[2] Fed officials want banks to rely more heavily on deferred compensation, and bonuses awarded as stock, to discourage risks that could lead to short-term gains, but long-term pain.
[3] Fed officials have claimed excessive compensation is the sort of risk that poses a broad threat to the financial system.
[13] In the original TALF, for instance, up to $1 trillion could be guaranteed by the Fed, but the Treasury indemnity for the programme was capped at $100 bn, leaving the Fed with a potential credit risk exposure of $900 bn.'' Other Fed programmes too have involved actual or potential exposures to private credit risk that were not guaranteed by the Treasury.
[27] If it is required to deal (as agent of the Treasury) with potentially insolvent counterparties, the credit risk and counterparty risk should be assumed fully by the Treasury.'' This is not the practice of any of the leading central banks today; prior to the crisis, only the Bank of England came close.
[27] The central bank should be involved only as an agent of the Treasury - an expert assistant.'' It should not put its own conventional or comprehensive balance sheet at risk. The two arguments against the central bank acting as a quasi-fiscal agent are, first, that acting as a quasi-fiscal agent may impair the central bank's ability to fulfil its macroeconomic stability mandate and, second, that it obscures responsibility and impedes accountability for what are in substance fiscal transfers.'' In the U.S. such actions subvert the Constitution, which clearly states in Section 8, Clause 1, that the power to tax and spend rests with the Congress: "The Congress shall have Power to lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general Welfare of the United States; but all Duties, Imposts and Excises shall be uniform throughout the United States."
[27] How can one not perceive a greater measure of bank balance sheet fakery when even the long-term solvency of the U.S. Treasury increasingly is being called into question? Indeed, this might be one reason why Treasury holdings among banks are so low. When the whole thing is set to blow, why not improve momentary appearances of solvency squeezing yield further out on the risk curve? It seems that, despite last year's near meltdown of the money market, those who chase yield even among what are widely perceived "safe instruments" (agencies) either have not learned a thing or the present moment is a ruse whose intention falls under "all things are not what they seem."
[37] The talk around the FOMC table is hardly likely to be about any rate action. What's been the payoff for the huge injection of funds and guarantees for America's biggest financial institutions? The U.S. Treasury Secretary, Mr Timothy Geithner, says they've become 'dramatically more stable'. He was one of the architects of the banks' rescue package at the height of the crisis. He is having a hard time defending their performance since.
[45] Treasury rates are pricing benchmarks for the credit markets: A sharp jump could send companies' borrowing costs rocketing, at a time when alternative funding from banks is still hard to come by. More importantly, higher borrowing costs would be a fresh blow to the large swathe of the community that can't hedge the credit card holders, home- and small business owners whose interest rates never got anywhere near zero, if they fell at all.
[29] In normal times, it buys and sells Treasury securities to influence the level of interest rates.
[30] Not a happy backdrop for the bimonthly meeting of the Federal Open Market Committee (FOMC) to decide U.S. interest rates.
[45] Economists and traders will be poring over the Federal Open Market Committee statement released after the meeting in search of signals for the direction of monetary policy. "The Federal Open Market Committee will use its post-meeting statement to acknowledge the recession has ended and revise its near-term forecast to reflect the better tone of the data," said Joseph Brusuelas of Moody's
Economy.com.
[20] The Federal Open Market Committee, the central bank's policy setting group, meets on November 3 and November 4.
[4] Under a "Treasuries only" policy, the central bank only buys Treasury securities outright.''
[27] If, as happened in the USA on a vast scale, the central bank allows itself to be used as an off-budget and off-balance-sheet special purpose vehicle of the Treasury, and refuses to provide to the Congress some of the information essential for the quantification of the fiscal transfers it has made, the central bank not only subverts the constitution.'' By attempting to hide contingent commitments and to disguise de-facto subsidies by not divulging relevant information on the terms on which the central bank has offered financial assistance, it undermines its own independence and legitimacy and impairs political accountability for the use of public funds - '''tax payers' money'.'' It is surprising that a country whose creation folklore attributes considerable significance to the principle of '''no taxation without representation' would have condoned without much outcry such a blatant violation of the equally important principle of '''no use of public funds without accountability'.'' This indeed amounts to a quiet usurpation of the power of the legislature by the central bank.
[27] Financial markets will comb through the central bank's policy statement, which will be released at around 2:15 p.m. EST (1915 GMT) on Wednesday, for any clues on when the easy money period will start drawing to a close.
[5] The benchmark for the central bank should be a "Treasuries only" policy of balance sheet and liquidity management.''
[27] In an emergency, where the government requires the good offices of the central bank to stop systemically important institutions from collapsing, the form but not the substance of the '''Treasuries only' policy can be relaxed.''
[27] In certain cases, the central bank "may require" an organization to develop a corrective action plan to address unsatisfactory compensation policies.
[19] The central bank was not divided over another part of program to buy $200 billion worth of Fannie and Freddie debt. It has bought $141.6 billion so far. The program has helped to prop up the housing market, but its health remains precarious.
[22] When the crisis started in August 2007, the Fed's conventional balance sheet was just under $1 trillion'' - about seven percent of annual U.S. GDP.'' At its peak, towards the end of 2008, the Fed's conventional balance sheet was just over $2 trillion, about fifteen percent of annual U.S. GDP.'' The Bank of England tripled the size of its balance sheet (as a share of GDP) over the same period.''
[27] When the Fed buys securities, it creates a credit on bank balance sheets, thus increasing the banks' ability to lend.
[43] Liquidity is generally defined as cash, deposits at other banks and any debt securities that the Fed will accept as collateral for overnight loans.
[37] Former Fed Chairman Greenspan is already warning that excess bank liquidity is unsustainable with market expected bank profits, economic growth and that tainted word "innovation."
[37] The review process is expected to include staff from the Fed's board, from the reserve banks that supervise the big banks and from other financial regulators, Tarullo said.
[38] The big U.S. banks are expected to present a plan that identifies where improvements to the pay structure are needed, and failure to submit or implement a satisfactory plan may lead to enforcement action, Tarullo said. "Our supervisory approach to compensation practices at LCBOs (large, complex banking organizations) will include an extensive horizontal review process, in keeping with our increased emphasis on this approach for the supervision of the largest institutions," Tarullo said.
[38] Banks subject to the guidelines will also be required to report regularly on compensation practices, and regulators will monitor how pay equates with incentives for executives, traders, and others who can boost a bank's risk profile.
[36] Bernanke stated: "Compensation practices at some banking organizations have led to misaligned incentives and excessive risk taking, contributing to bank losses and financial instability.
[18] The financial crisis "highlighted the potential for compensation practices at financial institutions to encourage excessive risk-taking and unsafe and unsound behavior -- not just by senior executives, but also by other managers or employees who have the ability, individually or collectively, to materially alter the risk profile of the institution," Tarullo testified Thursday.
[13] For 28 large complex organizations, "the Fed will review each firm's policies and practices to determine the consistency with the principles for risk -- appropriate incentive compensation set forth in the proposal. The policies and implementing practices adopted by these firms in response to the final supervisory principles will become part of the supervisory expectations for each firm and will be monitored for compliance."
[18] The Fed wants to change Wall Street's pay practices ahead of a public backlash against what is set to be a big bonus season at America's banks.
[10] "What don't do is set specific pay caps, and that would be overregulating." The meetings were notable because of how they were coordinated across the U.S. Part of the Fed's goal of supervising pay plans is to line up the largest financial companies nationwide and compare them with each other. Mr. Tarullo, a key architect of the proposal, said in his speech that the meetings were meant to deliver "our plans and expectations to these firms, with particular attention to beginning this information gathering."
[2] Many analysts think the Fed could start to raise rates in the spring or summer. Given the delicate state of the recovery, Bernanke made clear last month that he's in no rush to boost rates and reel in the unprecedented amount of money the Fed has plowed into the economy. Other Fed policymakers, however, have suggested that rates might have to go up sooner rather than later. "If policymakers insist on waiting until the level of real activity has plainly and substantially returned to normal — and the economy has returned to self-sustaining trend growth — they will almost certainly have waited too long," Fed Governor Kevin Warsh warned in a speech just days after the Fed's Sept. 22-23 meeting. It promises to be a high-wire act for the Fed. Boosting rates and removing supports too soon could short circuit the recovery, while holding rates low and keep supports intact for too long could unleash inflation.
[22] The Fed's survey of the economy ahead of the FOMC meeting the 'Beige Book' found employment trends are still weak and improvement in economic conditions'scattered and modest' at best. It's too early to call any recovery.
[45] "Probably the most important variable will be the unemployment. Now that GDP appears to have started growing, which would be one indication that the recession is ending, so they'll be sensitive to unemployment rate, I think," said Mr Cohen. "But if economy continues to grow and unemployment rate eases before mid next year, the Fed would start to tighten rates some time possibly as early as the first half next year," he added.
[35] The Committee will probably maintain the phrase, "economic conditions are likely to warrant exceptionally low levels of the federal funds rate for an extended period," but the recent pick up in economic activity has heightened chatter that Fed members may tweak the language by the end of the year.
[40] The two-year Treasury yield, the most sensitive to official rate moves, has held in a relatively tight range of 0.85%-1.05% for the past couple of months, convinced by the Fed's mantra that economic conditions warrant "an exceptionally low" target rate for "an extended period."
[29] The Fed's five-member Board of Governors, which includes Bernanke and Warsh, are always voting members of the committee.) Beyond rates, Fed officials — at their meeting in late September — were conflicted over whether to expand or cut back a program intended to drive down mortgage rates and prop up the housing market, according to minutes of the closed-door deliberations.
[22] In the three months it took to raise the target rate one percentage point, to 4.25%, the two-year yield had covered more than twice that distance, up 2.25 percentage points at 6.25%. A transparent strategy may help, but to avoid upending still-fragile markets and the gradual economic recovery, the Fed will need to hone its market-handling skills. If policy makers start increasing rates too early, "the market would really punish them for it," MF's Galante said.
[29] For now, Silvia and other economists also predict Fed policymakers will maintain a pledge to keep rates "exceptionally low" for an "extended period" to make sure the recovery gains traction.
[22] Krugman arguing for the Fed to remain at zero rates for SIX YEARS. the economists on the left have gone nuts. This will give Bernanke ammunition to do what he does best - print more money.
[29] Given the continued pressure on the Fed to become more transparent, observers said Bernanke is almost certain to be pressed to go further. "The Fed chairman testifies twice a year to the Congress and they ask him whatever is on their mind," said Chris Low, the chief economist at First Horizon National Corp.' s FTN Financial. "I imagine Bernanke is going to have to defend this decision."
[13] "The Fed has some glide time right now to see where the economy is going," said Wells Fargo's chief economist John Silvia.
[22] Even as the U.S. economy appears to be still in need of Fed support, the repercussions of emergency monetary policies are being felt around the world. Brazil has acted to stem the flood of speculative capital to its economy by adopting a 2 percent tax on foreign investment. Other nations have begun to intervene to keep their currencies from rising too sharply against the falling dollar.
[5] With nearly 10 percent of the labor force out of work, consumer spending -- the main driver of the U.S. economy and key to a sustainable recovery -- remains challenged. The FOMC has held its federal funds rate target at zero to 0.25 percent since last December in a bid to help kick-start the economy out of the worst downturn since the Great Depression.
[20] Despite signs factory activity is picking up, the U.S. consumers who normally account for around 70 percent of the economy's growth, are facing major challenges. Chief among them is a jobless rate currently hovering at a 26-year high just below 10 percent, which is expected to continue climbing into next year.
[4] The number of jobs cut by U.S. employers is expected to have fallen in October. A negative surprise like last month, when the unemployment rate hit its highest level in 26 years, could undermine confidence in the economic recovery, driving stocks lower.
[23] If so, CD rates will be left to other economic whims, like the U.S. dollar and aggressive bank marketers, if any upward movement is to occur. If last week is any indicator, that won'''t happen this week, either.
CD rates stood pat pretty much across the board last week, as banks held tight to that '''wait-and-see''' mindset we'''ve seen so much of this autumn.
[24] It pays to be cautious, as bargains are getting harder to find. Q&A WITH MARKO DIMITRIJEVIC: This hedge-fund manager still sees plenty of opportunities in emerging markets -- even after their big run this year. Progressive, one of the nation's best-run auto insurers is luring more customers with its innovative programs. Canadian banks are faring far better than their U.S. and European counterparts. Their stocks trade at a premium -- but they're worth it. Hyatt Hotels is likely to debut this week at a discount to what it's worth.
[25] Investors are nervous that monetary and fiscal stimulus measures may be ended too soon. "If the government pulls out too early and they are not spending, (and) the consumer is not spending, you've got a big issue," said Anthony Conroy, head trader for BNY ConvergEx, an affiliate of the Bank of New York. The bankruptcy of CIT Group Inc CIT.N on Sunday will also feed pessimism about the economy this week, traders said.
[23] John Mack, chairman of Morgan Stanley and Vikram Pandit, Citigroup's chief executive, attended a meeting in New York, as did senior executives from Goldman Sachs, JPMorgan Chase and Bank of New York Mellon.
[10] "Everyone agreed and Dudley said 'that's a good point and we will focus on it,'" a source said. Top executives from Goldman Sachs Group Inc ( GS.N ), JPMorgan Chase & Co ( JPM.N ), Bank of New York Mellon ( BK.N ) and Credit Suisse Group AG ( CSGN.VX ) were among those participating, a source said.
[8] William Dudley, president of the New York Fed, called the industry big-wigs to an extraordinary meeting.
[36] "The FOMC remains the immediate focus leading to position-adjustment trading," said John Spinello, chief fixed-income technical strategist at Jefferies & Co in New York. The benchmark U.S. 10-year Treasury note US10YT=RR traded up 3/32 in price while its yield eased to 3.41 percent from 3.42 percent late on Monday. Two-year notes US2YT=RR rose 1/32, their yields easing to 0.90 percent from 0.92 on Monday.
[31] "You're seeing some pre-FOMC positioning and pre-refunding announcement positioning," said John Canavan, analyst at Stone & McCarthy Research Associates in Princeton, New Jersey. The benchmark U.S. 10-year Treasury note US10YT=RR, which had been up 3/32 in price, was down 7/32, its yield at 3.44 percent versus 3.42 percent late on Monday.
[34] The benchmark U.S. 10-year Treasury note US10YT=RR traded 12/32 lower in price to yield 3.43 percent, up from 3.39 percent late on Friday, while two-year notes US2YT=RR traded 2/32 lower to yield 0.93 percent from 0.90 percent.
[33] Interest-rate markets, from Treasurys to swaps and futures, can be counted on to overshoot the Fed's first move, even in a relatively transparent tightening cycle. It's their job to anticipate policy shifts, as the leading tools for large corporations and financial institutions to guard against losses on changes in their borrowing costs.
[29] At the same time the Fed issued a record $1.25 trillion dollars in treasury notes and bonds, more than double a year ago's auctions.
[43] One growing problem on the horizon is that the Fed has to increase treasury offerings to $2.38 trillion dollars in the year starting October 1, up from $1.81 trillion in the past 12 months.
[43] Bernanke and his colleagues agreed to slow down the pace of a $1.25 trillion program to buy mortgage securities from Fannie Mae and Freddie Mac. Instead of wrapping up the purchases by the end of this year, the Fed said it would do so by the end of March.
[22] Now that the Fed is finished buying Treasuries, prices may decline in the absence of a major buyer, if all else is equal, which it never is. If this happens, yields on Treasuries, which move in the opposite direction of price, could increase. To be sure, the Fed won't complete its much larger program of buying over $1 trillion of agency mortgage-backed securities and agency securities in the spring. Some market observers suggest that the main impact from the Fed's securities purchases has not been so much to raise their prices but to lower the market's volatility, a factor which dampens options prices.
[25] Some people have accused the Fed of bailing out the bankers by pledging $11.2 trillion dollars, only for the bankers to make bigger profits and now are giving out record bonuses.
Goldman Sachs Group (NYSE
GS ), for example, has set aside a whopping $16.7 billion dollars, or 43% of earnings, for compensation and bonuses.
[18] Tarullo, who has helped lead the Fed's efforts, said pay at large firms warrants particular attention because flaws in compensation schemes could cause pain throughout the financial system, as the crisis demonstrated.
[3] "We are not waiting to begin the process of gathering information about compensation practices," Fed Governor Daniel Tarullo said at a conference on executive pay. "Today, in discussions across the country, we are communicating our plans and expectations to these firms, with particular attention to beginning this information gathering."
[3] "We are not waiting to begin the process of gathering information about compensation practices from LCBOs (large complex banking organizations)," Tarullo said in comments prepared for delivery to a conference on executive pay. "Today, in discussions across the country, we are communicating our plans and expectations to these firms, with particular attention to beginning this information gathering," Tarullo said.
[16] The compensation review, part of a broader proposal the Fed released last month, targets executives, traders and other employees at the 28 largest financial institutions. (For smaller institutions, compensation oversight will be added to regular safety and soundness examinations.) [13] There are downsides to releasing compensation figures that worry the industry, including the possibility that unregulated firms could use the information to poach employees. "There is a concern about people getting hired away," said Bert Ely, an independent consultant in Alexandria, Va. "Maybe it's an exaggerated concern … but people really do worry about it." The Fed might not have much choice but to withhold compensation details if they are contractually required to be kept confidential. "They can't release some of this because there is information that is confidential to the company and the board and would be detrimental to the shareholders if it were released," said Tim Bartl, the senior vice president and general counsel at the Center on Executive Compensation.
[13] Given the information that already exists, Robert Clarke, the former comptroller of the currency who is now a partner at Bracewell & Giuliani, dismissed the Fed's contention that the details it picks up are protected as supervisory information. "Compensation information about institutions is much more commonly available and people are used to seeing it," he said. "Whatever this review produces is not going to cause a run on the bank."
[13] Wouldn't you like to be a fly on the wall when
the Fed meets with bankers on pay review ? You can bet that sparks will fly. Monday is the day this happens. We already know that the bankers do not want the Fed meddling in their compensation policies.
[18] The meetings apparently were not contentious, and represents a good first step if the Fed is serious about pay reform. It has taken an approach based on principles and not rules, which we must all applaud.
[36] I suggest at the leastthe Fed could push the pigs at Goldie, and the other financial wizards away from the public troth.maybe they should have to get capitol the way the rest of us dothen we will see what bonuses they can pay.
[29] In the wake of the Fed's aggressive response to the financial crisis, it has been derided as a secretive agency.
[13] A big move risks derailing the recovery, but the small, quarter-point steps initiated by former Fed Chairman Alan Greenspan in 2004's cycle are widely blamed for creating the bubbles in the housing and credit markets that were at the heart of the crisis.
[29] Without increased loan volume in the small to medium sizes businesses, we will be stalling the recovery and letting good ideas go to waste. Banks need a new model to deal with this kind of "mezzanine risk", one that fits somewhere between venture funding and traditional asset based lending.
[37] Banks should be split apart to separate the basic banking of deposits, loans and mortgages from the gambling side of derivatives and other trading strategies. This would mean that the "too-big-to-fail" aspect would apply only to the basic utility type banking, and the racier stuff can be done with private money, letting such a bank fail due to losses if that's the way it pans out. That way, taxes and public money are not at risk to support activities that should fund themselves from private sources of finance.
[37] As regards repos and collateralised loans, the most extreme departure from the '''Treasuries only' model has been the ECB.'' The Eurosystem accepts as collateral in repos and at the discount window an astonishingly wide range of private securities, including most asset-backed securities, as long as they have a rating of at least BBB-.'' This collateral policy has been implemented in such a loose and generous way, that international banks with subsidiaries in the Eurozone have packaged and wrapped securities they could not use as collateral anywhere else in formats that made them eligible collateral at the Eurosystem. Only when the bank that borrowed from the Eurosystem has become insolvent, as in the case of Kaupthing's Luxembourg subsidiary and Lehman Europe, has the ECB had to write down its risky exposure.''
[27] The UK Treasury and the Bank agree on an upper limit on the amount of private securities that can be purchased by the Bank (currently '' 50 bn) and on the nature of the private securities that can be bought outright.''
[27] Geithner's Treasury and Congressional politicians are telling banks publicly to expand lending and boost the economy.
[37] If it does, commercial banks' prime lending rate, used to peg rates on home equity loans, certain credit cards and other consumer loans, will stay at about 3.25 percent, the lowest in decades.
[22] Rates on 30-year loans averaged 5.03 percent, Freddie Mac reported last week. That was down from 6.46 percent a year earlier.
[22] "Two years into a substantial economic downturn, loan quality is poor across many asset classes and. continues to deteriorate," said Jon Greenlee, associate director of the Fed's division of banking supervision.
[42] Unless we know the valuation to which the haircut is applied, we know nothing. She rejected the argument that loan records are not covered by the law because their disclosure would harm borrowers' competitive positions.'' The Fed for the first time had to identify the companies in its emergency lending programs.
[27] The Fed's policy statement could signal fewer liquidity measures for markets, while nonfarm payroll data and the Institute for Supply Management surveys on the manufacturing and services sectors will give early indications of how the economy is faring in the fourth quarter.
[23] Fed policymakers gather as the economy emerges from the worst recession since the 1930s to a much-awaited recovery.
[22] Separately, the Federal Reserve Governor Daniel Tarullo remarked that even though the economy has begun to show signs of life, the outlook on the magnitude of the recovery should be cautiously optimistic.
[46] Regardless of how gently or aggressively the Federal Reserve ends up raising rates, the success of the operation will be dictated by its stewardship of financial markets.
[29] Washington, November 2, 2009 - Federal Reserve Associate Director of Banking Supervision and Regulation, Jon Greenlee, said in testimony today that those large regional and community banking firms building up 'unprecedented concentrations of CRE loans' will be particularly affected by emerging conditions in real estate markets.
[47] The goal was
to underscore that the Federal Reserve is serious when it comes to the guidelines on compensation it has previously proposed.
[36] The federal reserve is the single biggest threat to the United States of America. These evil appointed banker reject peons have stolen trillions on behalf of their banking buddies like Goldman Sachs and JP Morgan. They have managed coerce Congressman Mel Watt of Charlotte, NC to gut Ron Paul's HR 1207 that would have audited the federal reserve.
[28] Market analysts on Wednesday will put the Fed's Federal Open Market Committee's statement under a microscope. [33] The rate-setting Federal Open Market Committee meets on Tuesday and Wednesday. It's widely expected the FOMC will hold the funds rate at its lowest-ever range of 0% to 0.25%, where it's stood since December 2008.
[26] The Bank of England and ECB will hold policy meetings on Thursday and are widely expected to leave policy rates unchanged.
[6] The major U.S. index futures are pointing to a lower opening on Tuesday, with the futures trimming their losses following the trickling in of deal news. Traders are likely to tread a cautious line, as they await the outcome of the FOMC rate setting meeting and the release of employment data.
[46] "We've had a reversal of some of last week's gains in Treasuries and a reversal of some of last week's losses in equities," said John Canavan, market analyst at Stone & McCarthy Research Associates in Princeton, New Jersey. The benchmark U.S. 10-year note US10YT=RR, down 7/32 in early dealings, expanded its loss to 16/32 after the release of data on U.S. manufacturing, construction and pending home sales. It subsequently erased much of the loss and yielded 3.41 percent, up from 3.39 percent on Friday. The 30-year bond US30YT=RR, briefly down a full point, was off 13/32 just before midday, its yield at 4.25 percent, up from 4.23 percent on Friday.
[32] Stocks recovered some losses after Berkshire Hathaway Inc ( BRKa.N ) said it would buy railroad Burlington Northern Santa Fe Corp ( BNI.N ) for $100 per share in cash and stock, but a loss from UBS AG ( UBSN.VX )( UBS.N ) and news from Royal Bank of Scotland Plc ( RBS.L ) and Lloyds Banking Group Plc ( LLOY.L ) spurred a move into safe-haven U.S. Treasuries, Spinello said.
[31] Bloomberg's "Bank of America Joins China as Buyer of Treasuries" and "Pandit 'Near Death' Cash Hoard Signals Lower U.S. Bank Profits" explore how bank fears and regulatory pressures are moving banks counter to the economic recovery.
[37] Signs of economic recovery could bolster investors' risk appetite to the detriment of bond prices while any signs the recovery is faltering could boost the safe-haven appeal of government debt. The most influential U.S. economic report this week is the October nonfarm payroll report due Friday.
[31] The third quarter GDP report on Friday signaled the end of the worst U.S. recession since the Great Depression, but government stimulus, including the "cash for clunkers" incentive for auto purchases and a $8,000 tax credit for first time homebuyers, helped prop the economy up.
[4] In essence it is about trying to revive and sustain consumer confidence and spending, which after all is the engine of U.S. economy." He added that inflation, which tends to rise during periods of lax monetary policy, has so far hovered at comfortable levels. Analysts noted that countries which have fared better than expected this downturn - such as India and China - have signalled that they may tighten monetary policy soon.
[35] The silver linings for the U.S. economy are that China and India are recovering strongly and the weak dollar is export-stimulative. Besides, after years of living beyond his means, the average American is starting to run down his debt and save. These may be just the right long-term prescriptions for a more stable economy and financial system and a lasting solution to global imbalances.
[45] Even the ISM employment index, long in contraction territory, turned positive, indicating the first inklings of a willingness to hire. "Given the fairly good performance of this indicator in predicting the performance of the U.S. economy more generally, it is pointing to further upward momentum in U.S. economic activity," said Millan Mulraine, economics strategist at TD Securities.
[4] The good news on the economy on Monday included the Institute for Supply Management's factory index, which showed U.S. manufacturing grew for the third straight month.
[33] The ISM index shot up to 55.7 in October, the third straight reading above 50, which signals growth in the sector. It was the highest level since April 2006. "It clearly looks like we are seeing a turnaround in the manufacturing sector," said David Wyss, chief economist at Standard & Poor's in New York. Economists said the manufacturing pattern seen in the past two post-recession recoveries will likely be repeated this time: In each case, early strength in manufacturing, led by companies' restocking of inventories, faded within a few months.
[21] "The ISM was particularly strong, but it doesn't change the outlook on rates," said Thomas Simons, money market economist at Jefferies & Co in New York.
[6] Economists underscored that inflation continued to be tame amid the fragile recovery, well within the Fed's comfort zone. "The inflation outlook should also remain unchanged, with the committee noting that it expects inflation to remain'subdued,' on account of the'substantial resource slack' and stable longer-term inflation expectations," Mulraine said.
[20] Fed policy-makers and economists have said there are plenty of problems that could dampen economic growth, in particular high unemployment and a sluggish housing market.
[6] Fed chairman Ben Bernanke recently signaled there was no hurry to tighten monetary policy, saying action would be taken "when the economic outlook has improved sufficiently."
[20] The market reaction to the removal of the most accommodative policy investors have ever seen, in place for almost a year already, could undermine the Fed's intentions. "Once the Fed starts to hike, the market's going to take matters out of its hands," said MF Global portfolio manager Don Galante.
[29] The Fed has artificially kept the interest rate low.Of course,there is a lot of inflation,but they do not want to acknowledge that because the insiders are the wallstreet people who want the stocks to go up.If they raise the interest rate(which they must),then wallstreet does not like it.Therefore,the feds are not going to raise the interest rate in the intersest of the wallstreet people.
[28] Fed purchases helped to keep interest rates from rising i.e. the yield on the benchmark 10-year note never went above 4%.
[43] The trouble is that the risk weighting is credit based and does not take into account interest rate risk.
[37] Puts increase in value when securities decrease, which would happen if long-term interest rates rise.
[25] Everything horrible again?? Whose wheels are being greased this time. The ones who profit from low zero interest rates that is who paying these folks to scare us to death. 90% of our people are working. These clowns are all coming on to scare us into accepting low, low interest rates. They are making Wallstreet and all the Multinationals happy with their scare munger talk.
[37] The Eurodollar market that offsets the impact of interest rate shifts on foreign exchange is priced for a 4% target rate by December 2013a very conservative guess.
[29] The Fed often waits at least several months after unemployment, a lagging indicator of recovery, peaks before beginning to raise rates. [20] Mr. Bernanke has gone along with and has even publicly supported the Fed'''s new position by being a regular part of the TV talk show circuit and permanent guest of the House and Senate. Bernanke has publicly avoided speaking about the two major results of the agency'''s new role although he probably agonizes over them in private.
[12] Gil Schwartz, another former Fed lawyer now in private practice, agreed. "It makes it much more difficult for the Fed not to release more and more information," he said. "One of the things the agencies have learned is that the release of a lot of this information doesn't jeopardize national security."
[13] "Incentive compensation arrangements should not create 'heads I win, tails the firm loses' expectations," Fed governor Daniel Tarullo said Monday in a Washington speech.
[2] Banks are currently deciding on 2009 bonus payments. The regulator gave banks until Feb. 1 to prepare an analysis of how their compensation practices would meet the guidelines.
[14] The redistributive quasi-fiscal activities of the central bank don't necessarily require any net subsidies to the private sector.
[27] With the central bank buying Treasuries, dealers will tend to increase prices because.
[25] The latest results of the largest banks show old bad habits disproportionate trading and risk taking in financial markets are back with a vengeance. [45] "Bonuses and other compensation arrangements should not provide incentives for employees at any level to behave in ways that imprudently increase risks to the institution, and potentially to the financial system as a whole."
[13] Many of the banks aren't expected to push back aggressively against the proposal, in part because it stops short of direct caps on pay. "It is balanced, and it is comprehensive," said Scott Talbott, senior vice president of the Financial Services Roundtable, a trade group representing large financial companies.
[2] Banks that owe TARP funds at least fall into a different class. The government is one of their major '''stakeholders''', if not their largest one. It has by that ownership some of the actual rights of ownership. Independent financial companies, especially those which are publicly-held are still ruled by a governance system which has worked for decades with only modest modifications.
[12] Confidence in the banks will wane to zero and we will see bank runs. Expect the government to test its new 'not too big to fail' rules by breaking up Citi. BofA can avoid this by spinning MER off.
[37] I like the new emphasis on liquidity by the top commercial banks, but caution that it might not provide as much security as it appears.
[37] Bank of America (
BAC ) September liquidity stood at $422.6B, 19% of assets; Citigroup $450.3B, 24% of assets; JP Morgan (
JPM ) $453.6B, 22% of assets and Wells Fargo (
WFC ) $201B, 16% of assets. In cash alone, JP Morgan is holding $80.7B and Citigroup an amazing $245B. The big four banks are claiming that they are protecting themselves from adverse conditions.
[37] Soured loans will still weigh on banks. More homeowners are expected to go under water, meaning they owe their lender more than their home is worth.
[22] Economists predict it will hit 9.9 percent when the government releases the latest snapshot on employment conditions on Friday. It's expected to top 10 percent this year.
[22] Song Seng Wun, regional economist, CIMB-GK Research said: "Recently, you have seen the lag effect of government spending in terms of fiscal stimulus packages, giving the economy a mild boost in third quarter and more so, private consumption. "It looks like, with confidence flagging because of uncertainty (in the) labour market, we have seen signs of pullback on consumer confidence. That could translate to weaker numbers in the coming couple of quarters.
[35] The FOMC meeting comes after official data showed last week the economy grew for the first time in a year in the third quarter, ending the worst recession in decades.
[20] The unemployment rate hit a 26-year high of 9.8 percent in September, according to the latest official data, and is expected to reach double digits in the coming months.
[20] On the economic indicator front, U.S. factory orders data due at 10 a.m. (1500 GMT) is expected show a 0.8 percent increase in September, reversing August's 0.8 percent drop.
[31] Supporting Treasuries were the U.S. Treasury's lower projected borrowing need in the first fiscal quarter than forecast and an overnight rate increase in Australia that weighed on equities in Asia and Europe, analysts said. [31] The improvement has been aided by federal intervention to lower mortgage rates and bring more buyers into the market. "We think this recovery is sustainable," said Sal Guatieri, an economist at BMO Capital Markets.
[21] The directive already includes the contingent language Woodford recommends. It says: "economic conditions are likely to warrant exceptionally low levels of the federal funds rate for an extended period."
[7] SOURCES1.
Fed gives banks deadline to submit exec pay proposals -- latimes.com2.
Fed Pushes Bankers on Pay Overhauls - WSJ.com3.
WRAPUP 1-Fed summons bank CEOs to press for pay overhaul | Reuters4.
Fed to mull recovery, financial stability at policy meeting | U.S. | Reuters5.
Fed Seen on Hold as Outlook Uncertain - ABC News6.
MONEY MARKETS-U.S. rate futures signal Fed on hold pattern | Currencies | Reuters7.
Getting a Fix on the Fed - BusinessWeek8.
UPDATE 1-Banks meet NY Fed for pay rules -- sources | Markets | Europe | Reuters9.
Banks meet NY Fed for pay rules -sources | Markets | Markets News | Reuters10.
Fed wants early pay curbs - City AM11.
FT.com / UK - Fed tells banks to adopt pay rules early12.
The Fed Asks Banks To Read Its Mind 24/7 Wall St.13.
Fed's Tough Transparency Talk Doesn't Apply on Pay14.
emii.com: Fed: '''09 Bonuses Must Meet Pay Guidelines15.
FT Alphaville » Blog Archive » Fed to banks: adopt pay rules now16.
Fed's Tarullo: Talking to banks about pay plans - Forbes.com17.
UPDATE 1-U.S. Fed to meet bank execs on pay reviews | Reuters18.
Fed meets bank executives on pay: Will the sparks fly? - BloggingStocks19.
AFP: Fed gathers top bank execs for talk on pay, bonuses20.
AFP: Fed unlikely to change tack as recession ends21.
Three strong economic reports lift recovery hopes | Business | Star-Telegram.com22.
The Associated Press: Fed to hold rates at record-low, but cracks emerge23.
Goodbye to all that stimulus? | Reuters24.
CD Rate Trends This Week: Nov. 3 | Savings | Money/Investing | Mainstreet25.
Hedging Against Big Ben & Co. - Striking Price Daily - S. Sears - Barrons.com26.
RATE FUTURES REPORT: Market In 'Holding Pattern' Before FOMC - WSJ.com27.
FT.com | Willem Buiter's Maverecon | Should central banks be quasi-fiscal actors?28.
MacroScope » Blog Archive » Fed all talk, no action? | Blogs |29.
Markets Will Complicate Fed Policy Shift - Real Time Economics - WSJ30.
Brian Sack Engineers Big Moves at Fed - WSJ.com31.
TREASURIES-Prices firm; weak equities spur safe-haven bid | Markets | Bonds News | Reuters32.
TREASURIES-Strong economic data dents demand for govt debt | Markets | Bonds News | Reuters33.
TREASURIES-Strong economic data hits demand for govt debt | Markets | Bonds News | Reuters34.
TREASURIES-Prices turn lower, pre-Fed positioning cited | Markets | Bonds News | Reuters35.
channelnewsasia.com - Fed likely to maintain accommodative monetary policy stance till mid-201036.
Fed gets pay offensive in gear - FierceFinance37.
Bank of America, Citigroup, JP Morgan and Wells Fargo Stocking Up on Liquidity -- Seeking Alpha38.
Fed's Tarullo: Big Banks' Pay Extensive Review To Begin Shortly- Onet.pl - Wiadomo'ci -02.11.200939.
Fed telling banks to voluntarily adopt pay guidelines is not a good idea - BloggingStocks40.
Fed kicks off two-day meeting today41.
US FED: Tarullo Says Fed's Compensation Guidance Not Formulaic - Forbes.com42.
Fed Official: US Banks `Far From Robust' - WSJ.com43.
Fed ends purchase of $300 billion in Treasury securities - BloggingStocks44.
Dollar Calls the Tune for Stocks, Bonds, Oil - WSJ.com45.
The Hindu Business Line : Fed out, Govt in again?46.
RTTNews - Latest Earnings,Upcoming Earnings, Pos Pre Announcements, Pos Pre Announcements , Positive Surprises, Negative Surprises, Hot Stocks, Stock Split Calendar, Stock Buybacks, Dividends, Negative, Positive PreAnnouncements,Surprises . 47.
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