Wednesday, December 16, 2015


Well, she did it.  Up went Fed funds by 1/4% today along with the statement that we might get four rises in the course of the next year.  To some that was unexpectedly bullish; to others it was ,"Eh."  I'm in the latter camp.  Times change and it is an election year.  We shall see, but in the mean time it took Wells Fargo about 20 seconds to raise its Prime Rate by the same 1/4% in what could be called unseemly haste (OK, I'm switching plays).  But good for savers you say.  Are you kidding?  There isn't a bank around that will raise deposit rates...remember Dodd/Frank?  No one wants more deposits because they mean a bigger balance sheet, and that requires more capital and more cost.  So we get a boost in interest differential income to the extent that loan assets are priced on a Prime basis which means only the little guy pays more as no one else is priced at Prime.  Doncha love it?

In short, this is a non-event but at least it's over and the world can now go back to worrying about the next rate hike.  Oh, Janet did say that the Fed would not be unloading the $4 trillion on its balance sheet anytime soon which didn't get quite as much attention as one would have thought. Where the hell $4 trillion would have gone is anyone's guess but chalk it up to sound balance sheet management.  Whatever.  The dog barks, and the caravan moves on.  We'll see what the rest of the world has to say tomorrow.

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