senate-banking-committee

The Fed's rosy worldview rests on a misleading premise

(Janet L. Yellen, Chair, Board of Governors of the Federal Reserve System, looks over her notes as she testifies before the United States Senate Committee on Banking, Housing, The Federal Reserve’s credibility is increasingly under scrutiny as it insists on raising interest rates despite signs of continued weakness in the labor market and, importantly, an inflation rate that refuses to climb to the central bank’s official 2% target.

Fed officials often say their decisions about interest rates are data-dependent. However, this description has been tested lately by inflation figures that keep falling despite official assurances that downward pressures on growth and inflation seen during the first quarter would be “transitory.”

This has caused Deutsche Bank economist Torsten Sløk to redefine how he interprets the Fed’s notion of data-dependence. It looks a lot more like model-dependence.

“The Fed often says that their policy decisions are data dependent. Their data dependency is, however, very selective,” he said in a research note to clients. “Recently inflation has been moving down but the Federal Open Market Committee has nevertheless continued to raise rates and remain hawkish, with the argument that their models say that inflation will soon accelerate up to 2%.”

The problem is that the Fed’s optimism about growth and inflation has been misplaced before — rather often, in fact. 

(Gluskin Scheff)
Indeed, wage growth and inflation itself have remained subdued despite a 4.3% unemployment rate, a sign that the job market still has some room to improve before returning to full health.

“Looking at speeches by the Fed chair over time there is indeed a pattern that [Janet Yellen] in recent years has been focusing more on ‘models’ than on 'incoming data’ or 'incoming information,’” writes Sløk.

“We agree with the Fed that inflation will move higher in coming quarters, but the fact that economists have been wrong in their forecasts of inflation for several years is a humbling experience both for the economics profession and for the Fed,” he cautions.

(Deutsche Bank)

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Senator Elizabeth Warren asks financial regulators why they have not criminally prosecuted senior executives at Wall Street banks that have broken the law, at a Senate Banking Committee hearing on September 9, 2014.

When Senator-elect Elizabeth Warren gave her victory speech on election night at a party where loudspeakers blared “Ain’t No Stoppin’ Us Now,” she pledged to “hold the big guys accountable.” Now, some bankers, their lobbyists and their Republican allies on the Senate banking committee reportedly would like nothing better than to keep Ms. Warren off the powerful bank panel — where she could do the most harm to the status quo, and the most good for the country.
Elizabeth Warren Wins Senate Banking Committee Seat

Okay, some things are just meant to be and this is one of them! Great news!!

Nearly two years after Wall Street waged a successful campaign to keep consumer advocate Elizabeth Warren from running the Consumer Financial Protection Bureau, the incoming senator will be tapped to serve on the Banking Committee, according to four sources familiar with the situation. It’s a victory for progressives who battled to win her a seat on the panel that oversees the implementation of Dodd-Frank and other banking regulations.

huffingtonpost.com
Elizabeth Warren Wins Senate Banking Committee Seat

Nearly two years after Wall Street waged a successful campaign to keep consumer advocate Elizabeth Warren from running the Consumer Financial Protection Bureau, the incoming senator will be tapped to serve on the Banking Committee, according to four sources familiar with the situation. It’s a victory for progressives who battled to win her a seat on the panel that oversees the implementation of Dodd-Frank and other banking regulations.

Warren knocked out Republican Sen. Scott Brown of Massachusetts in the most expensive Senate contest of 2012, with Wall Street spending heavily to beat Warren, a former Harvard law professor.

Sources also told HuffPost that Sen. Joe Manchin (D-W.Va.) will be named to the panel.

The federal government until recently shielded big banks from criminal prosecution out of concern that convictions may damage the financial system, a top Federal Reserve official said Friday, explicitly acknowledging a policy long denied by the Obama administration.
 
The admission came during a tense exchange between William Dudley, president of the Federal Reserve Bank of New York, and Sen. Sherrod Brown (D-Ohio) at a Senate Banking Committee hearing meant to explore the cozy relations between federal regulators and the banks they supervise.
act.credoaction.com
Tell the Federal Reserve Board of Governors: Retire Scott Alvarez


In a Senate Banking Committee hearing this week, Senator Warren blasted General Counsel Scott Alvarez for criticizing Wall Street reform. Alvarez has so much influence, in an organization ruled by a board of seven governors, he is referred to as the “Eighth Governor.” In fact, while we were fighting to block the White House from making Larry Summers chair of the Federal Reserve, the New York Times suggested that as long as Alvarez was general counsel it might make little difference who got the top job.

I just took action to stand with Elizabeth Warren and stop the Fed’s top lawyer from undermining Wall Street reform. I think you should, too. Click HERE to sign the petition.

If you’re caught with an ounce of cocaine, the chances are good that you’re going to go to jail. If it happens repeatedly, you may go to jail for the rest of your life. But evidently, if you launder nearly a billion dollars for drug cartels and violate our international sanctions, your company pays a fine and you go home and sleep in your own bed at night. Every single individual associated with this. I just think that’s fundamentally wrong.
—  Elizabeth Warren, Senate Banking Committee Hearing- Bank Money Laundering (beginning at 7:05) http://www.youtube.com/watch?v=7cKTBy7_S_I&feature=youtu.be
The Democratic senator from Massachusetts had a straightforward question for them: When was the last time you took a Wall Street bank to trial? It was a harder question than it seemed. “We do not have to bring people to trial,” Thomas Curry, head of the Office of the Comptroller of the Currency, assured Warren, declaring that his agency had secured a large number of “consent orders,” or settlements. “I appreciate that you say you don’t have to bring them to trial. My question is, when did you bring them to trial?” she responded. “We have not had to do it as a practical matter to achieve our supervisory goals,” Curry offered. Warren turned to Elisse Walter, chair of the Securities and Exchange Commission, who said that the agency weighs how much it can extract from a bank without taking it to court against the cost of going to trial. “I appreciate that. That’s what everybody does,” said Warren, a former Harvard law professor. “Can you identify the last time when you took the Wall Street banks to trial?”
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Elizabeth Warren Embarrasses Hapless Bank Regulators At First Hearing: Huffington Post. Video at the link.

This is quite nice.