Wednesday, April 5, 2017


China?  Nah.  Russia's? Nah.  Syria?  Nah.  Susan Rice?  Nah.  Today was all about the Fed.  First, the good news.

Big Danny Tarullo is gone.  Back to Boston.  Back to Mama (Harvard or CrazyLizzy?).  But not without a few parting shots among which was the suggestion that it was the Fed itself that wacked Jeff Lacker, the former President of the Richmond Fed for his complicity in the release of important confidential information in 2012.  Of course Big Danny meant to leave the impression that when he says, " the Fed" he means the gang in D.C. And the gang in D.C. is certainly in his mind Big Danny.  Perhaps I am being unkind and he really was referring to the underbosses on the Richmond Board but I doubt it.  Of one thing I am sure...I will find out.  Does it make a differences?  Probably not.  Anybody asking why it took five years?  Probably not either.  I find that out as well.

Now comes the good part.  In his bye, bye speech Danny also let it be known that in his humble opinion there are parts of Dodd/Frank that don't work real well; to wit the VOLKER Rule AND of all things, the thought that the subjective portion of the "stress tests" on which the banking system has reportedly spent around $2 billion over the past few years trying to understand might not be necessary.  Now I have spent a lot of space in the past discussing these two landmarks of legislative genius so no reason to continue to beat a dead horse but do you think ANYONE present at this intellectual Epiphany asked Danny why the hell he was the leading advocate of these two provisions in the first place?  Nope.  At least not that I can find.  And so, billions of dollars later...dismissed with a failing grade.  Thank you for your service.

Finally, out goes Danny with the thought that although the capital position of the banking system has more than doubled in the past 8 years, wrecking returns, wrecking returns to shareholders and placing the system at a considerable disadvantage to its major competitors in the world, it still needs more capital.  Akin to this, Danny seems to still miss the point the the alternative banking universe in the U.S. has grown by leaps and bounds to a great extent at the expense of traditional providers of capital and is considerably less capitalized and for all intents and purposes, completely unregulated.  If the balloon goes up again I want to be in the basket underneath Citibank and J. P. Morgan.

So good bye and good luck to Mr. Tarullo.  Fortunately, we still have his  colleagues and his old shop to count on for a chuckle or two.

The minutes of the last meeting were released today.  Seems as though

1.  Them seem to think equities are somewhat overvalued despite having never had a clue about equities in the past 50 years.

2.   The course seems to be set on at least two more bumps in interest rates this year...memo to the Fed: by raising rates you will certainly find out if the valuations on equities are too high or not.

3.  They are trying to figure out a way to start reducing that $4.5 trillion dollar balance sheet.  First step...reduce to $18billion next month's purchase of mortgage backs.  Seems to make sense in as much as the rise in interest rates has put a big crimp in the refinancing of home mortgages.  Yeah, really.  Ain't that the damnedest.

Oh, upon the release of the minutes, equities reversed to the extent of about 250 points on the DOW closing down. Over 40 points.  Funny how these things seem to be related. Ha, ha............

Mr. Xi comes to the Palm Beaches tomorrow.   Good luck to both leaders.  This really does the above mentioned.  Sometimes I need a lead-in.  Don't always take me too seriously.

No comments:

Post a Comment