Backgrounder posted August 20, 2014
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
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
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
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.
Issue Brief posted July 24, 2014
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…
Backgrounder posted July 1, 2014
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…
Issue Brief posted May 6, 2014
Financial Stability Oversight Council and Asset Management Firms
The 2010 Dodd–Frank Act greatly expanded the federal government’s reach into financial markets. In particular, the creation of the Financial Stability Oversight Council (FSOC) leaves the Federal Reserve poised to regulate nonbank sectors of financial markets more extensively than ever before. The FSOC is supposed to increase U.S. financial stability, but in practice it…