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  • Commentary posted September 8, 2014 by Norbert J. Michel, Ph.D. Is the Federal Reserve Running On Empty?

    Politico ran an attention-grabbing headline last week: The Mystery Woman Who Runs Our Economy.  The article itself offered an interesting look at what makes Yellen tick, but the title presupposed way too much. No single person or committee runs our economy, no matter how hard the Federal Open Market Committee tries.  Far from harmless, this notion that someone in…

  • Commentary posted September 8, 2014 by Stephen Moore, Norbert J. Michel, Ph.D. The Fed Can’t Fix the Economy

    A strange thing happened at the Federal Reserve Bank’s summer-end conference in Jackson Hole, Wyo. Usually these are boring affairs, but liberal protesters crashed the party this time, and demanded that the Fed help the poor by holding interest rates close to zero and injecting more dollars into the economy. An exchange between Reggie Rounds of Ferguson, Mo., and Fed…

  • Commentary posted August 22, 2014 by Norbert J. Michel, Ph.D. Bitcoin Currency: The New Frontier for the CFPB

    The Consumer Financial Protection Bureau (CFPB) has unparalleled powers over nearly every consumer financial product and service.  Given that virtual currencies can serve as a form of electronic money, the CFPB has, predictably, decided to weigh in on this topic. A CFPB statement this week warned people about the dangers of private digital currencies such as Bitcoin,…

  • Commentary posted August 20, 2014 by Norbert J. Michel, Ph.D. Housing finance reform: It’s still about investment guarantees

    The 2010 Dodd-Frank Act was sold as a reform bill that would reduce risk in financial markets, yet it barely touched the single biggest source of that risk: the government-sponsored enterprises Fannie Mae and Freddie Mac. Several GSE reform proposals have since surfaced in Congress, but those that have garnered the most political support still would perpetuate the old…

  • Backgrounder posted August 20, 2014 by Norbert J. Michel, Ph.D. The Fed’s Failure as a Lender of Last Resort: What to Do About It

    It is not obvious that the Fed should be involved in emergency lending, however, since expectations of such lending can increase the likelihood of crises. Arguments in favor of this role often misread history. Instead, history and experience suggest that the Fed’s balance sheet activities should be restricted to the conduct of monetary policy. —Renee Haltom, Research…

  • Issue Brief posted August 14, 2014 by Norbert J. Michel, Ph.D. Federal Reserve’s Expansion of Repurchase Market Is a Bad Idea

    The Federal Reserve has been expanding a new “test” program it calls the Overnight Reverse Repurchase Facility (ON RRP). This program is a drastic departure from its regular open-market operations and potentially expands the federal financial safety net to the entire money market. Such an expansion increases systemic risk and increases the likelihood of unintended…

  • Backgrounder posted August 14, 2014 by Norbert J. Michel, Ph.D., Stephen Moore Quantitative Easing, The Fed’s Balance Sheet, and Central Bank Insolvency

    More than five years after the 2008 financial crisis, the Federal Reserve’s role is still the subject of much debate. One source of controversy has been the extent to which the Fed allocated credit directly to possibly insolvent institutions. Critics argue that the Fed should have allowed insolvent firms to restructure through bankruptcy and should have provided credit…

  • Issue Brief posted August 11, 2014 by Norbert J. Michel, Ph.D., John L. Ligon Five Guiding Principles for Housing Finance Policy: A Free-Market Vision

    The two government-sponsored enterprises (GSEs), Fannie Mae and Freddie Mac, remain under government conservatorship with the federal government standing behind all of their obligations. Housing finance reform is likely to be addressed during the next congressional session, but it appears the House and the Senate may offer very different reform proposals. Congress…

  • Commentary posted August 6, 2014 by Norbert J. Michel, Ph.D. The Pseudo Science of Inflation

    Many economists were quick to jump all over the Federal Reserve for its expansionary monetary policies surrounding the 2008 financial crisis. After its typical open-market purchases did little to get the economy moving again, the Fed embarked on several rounds of quantitative easing (QE), the most expansive policies it has ever orchestrated. The fear has always been that…

  • Commentary posted July 30, 2014 by Norbert J. Michel, Ph.D., Diane Katz Dodd-Frank an Unfinished Failure

    This month marks the 45th anniversary of man landing on the moon, and the fourth anniversary of the signing of the Dodd-Frank Wall Street Reform and Consumer Protection Act. The two events couldn’t be more different. The moon landing was a rousing, tangible achievement that millions of people watched on TV. Dodd-Frank was an amorphous piece of legislation that failed to…

  • Issue Brief posted July 24, 2014 by Norbert J. Michel, Ph.D. IMF Wants U.S. Taxpayers to Shoulder More Risk

    The International Monetary Fund’s (IMF) report on its 2014 Article IV consultation with the United States highlights the importance of securing a safer financial system. The IMF’s policy recommendations would, however, achieve the opposite while putting U.S. taxpayers at risk. IMF Report Gets Housing Finance Wrong For starters, the IMF report states the U.S. should…

  • Commentary posted July 23, 2014 by Norbert J. Michel, Ph.D. The Fed Is Not An Investment Manager

    “Buy low, sell high.”  It’s a sure-fire prescription for making money on Wall Street…if you can do it. The problem is that it’s difficult to know when a stock price will bottom out or peak. Also, there’s no objective measure against which you can compare a stock’s price. How high is “too high,” for instance? Well, fret no more. Apparently, the Federal Reserve has…

  • Commentary posted July 15, 2014 by Norbert J. Michel, Ph.D. Will the Fed Go Tone Deaf When Fine-tuning the Economy?

    Has the economy recovered enough for the Fed to reverse course and start raising interest rate targets? Should it pull the plug on quantitative easing? The latest Federal Open Market Committee (FOMC) announcement did nothing to settle this debate. Nor did it contain any real surprises. As expected, the Fed announced it will continue its taper.  Beginning in July, it…

  • Commentary posted July 15, 2014 by Norbert J. Michel, Ph.D. Dodd Franks Financial Monster Council The FSOC

    Criticism of the Financial Stability Oversight Council (FSOC) has been quietly building inside the financial industry.  Most of the criticism has centered on the FSOC’s lack of transparency and clear standards with respect to designating large financial firms as systemically important financial institutions, the so-called SIFIs. AEI’s Peter Wallison has just given a…

  • Backgrounder posted July 1, 2014 by Norbert J. Michel, Ph.D. The Centennial Monetary Commission Act of 2013: A Second Look at the Fed and the 2008 Financial Crisis

    More than five years after the 2008 financial crisis, the Federal Reserve’s role is still the subject of much debate. Some critics feel that the Fed’s efforts to stem the financial panic were misguided because they allocated credit directly to insolvent institutions. They believe that the Fed should have allowed insolvent firms to restructure through bankruptcy and should…