Federal Reserve Department of Irony

The Fed released these two announcements today:

Federal
Reserve and other central banks announce measures designed to address elevated
pressures in short-term funding markets

and

Late
Governor Gramlich honored with Lifetime Achievement Award for Responsible
Finance

There is something terribly ironic about these two announcements on
the same day: They each relate back to Federal Reserve failures: Their inadequate supervision of the banking system, and their ultra-low rates (which were also kept quite low for a full year).

Gramlich, in case you were unaware, served as a Fed Governor
from 1997 to 2005. As we noted back in June:

"I would have liked the Fed to be a leader" in
cracking down on predatory lending, Mr. Gramlich, now a scholar at the
Urban Institute, said in an interview this past week. Knowing it would
be controversial with Mr. Greenspan, whose deregulatory philosophy is
well known, Mr. Gramlich broached it to him personally rather than take
it to the full board.
-WSJ

Too bad there weren’t more Gramlich and less Greenspan on the Fed over that period . . .

Sources:
Late Governor Gramlich honored with Lifetime Achievement Award for Responsible Finance
Federal Reserve, December 12, 2007 http://www.federalreserve.gov/newsevents/press/other/20071212a.htm

Federal
Reserve and other central banks announce measures designed to address elevated
pressures in short-term funding markets

Federal Reserve, December 12, 2007 http://www.federalreserve.gov/newsevents/press/monetary/20071212a.htm

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What's been said:

Discussions found on the web:
  1. peter from oz commented on Dec 12

    everyone probably agrees
    BTW why is the need for historic global co operation of Central Banks to arm twist the major global banks to lend to each other let alone their clients “good news”
    this sort of “liquidity” injection will probably nearly be enough to shore up the major banks 31/12 Balance Sheets and keep their proprietary desks afloat with a little bit left over for the “independendent” hedge funds which are mainly only speculative highly geared longs anyhow

    broadening the “auction process” is just window dressing to indicate that the Fed and other Centrals ate tapping any available source of major global liquidity
    interesting to see what it does to the bond markets
    Paulson didn’t look so impressive in China either when he failed on the yuan his main theme then was “product quality improvement”
    considering Chinese manufacturers only receive 15% of the $ you pay at Wal Mart its no wonder the Chinese consider “the yaun offensive” some sort of Occidental joke
    rgds pcm

  2. peter from oz commented on Dec 12

    NEW YORK (CNNMoney.com) — U.S. blue chips took a sharp turn south Wednesday as investors absorbed news from Bank of America and Wachovia that their mortgage-backed securities had lost even more value than the banks had thought.—

    followed by a lacklustre “tidy up” held together by mirrors and strings
    rgds pcm

  3. Eric Davis commented on Dec 12

    I think the fed has completely dry-humped the market… and pulled off a Nice pull on a string.

    Now everyone is confused.
    To be honest, I was hoping for a 2% fixed 60 year home equity loan next year… That would provide me with my own Carry trade for the rest of my life… But alas… No joy in mudville…

    but I think, it’s time for a good run at the lows.

    Cause the fed is going to save the dollar, and dumped on Chitty bank..

    I still want to know the details of the auction.

    Oh, and great job this morning…

    Steve was funny this afternoon.. “The Fed is Long Volatility.”

    Cheers everyone.

  4. peter from oz commented on Dec 12

    glad someone is laughing
    at least Rupert has a shock horror headline for the “new” WSJ
    “US Trade deficit deepens”
    to repeat a previously stated fact exported goods ex China average cost is 15c/$ on your shelves
    what happens to the other 85c (after financing charges)?
    MNCs wouldn’t use transfer pricing and tax minimisation would they?
    MNCs don’t transfer blue and white collar jobs to the lowest global cost centre do they?
    It’s an Election Year and nothing plays better in Peoria than jobs and trade embargoes
    So a bit of grandstanding from your elected betters and some dyke plugging from Paulson and Bernanke and then its business as usual
    And where are you guys in the shell game?
    Well you’re not in it you’re just overpaying for a bad view seat in the bleachers!
    Don’t worry about gas prices because when your on the slippery slope to nowhere you don’t use much of it!
    rgds pcm

  5. David commented on Dec 12

    Barry,
    The Fed was dropping money from helicopters, however, the bankers weren’t picking it up, so now they have to run after the any banker with truckloads of money yelling “please take it, pretty please take it! The Fed’s next action will be tough guy, “Take this money or we will break your kneecaps”! However, by that time, our money will be monopoly game board money.

    Please, were is Paul Volcker, we need you!

  6. JJL commented on Dec 12

    It seems that the FED moves over the last 24 hours were “Lost in Translation”. I do not think the markets have any idea what to make of any of this. The FED should stick to rate cuts as to not confuse the poor saps on Wall Street.

  7. scorpio commented on Dec 12

    Bernanke must make it clear to the market — guys like Cramer and Kudlow — that he is in fact on track to get us back to 1.0% short rates, but that he’s going to be METHODICAL about it, just a 1/4 point a month. not gonna rush. and if that doesnt work he’s going to write a derivative contract and buy everyone’s stock — or at least all the big hitters’ stock — at a 25% premium. just buy it from them. automatic 25% return. and maybe a vacation home. i believe that only then will confidence return to the market.

  8. Eric Davis commented on Dec 12

    … I’m not a conspiracy guy, I like to give people who talk that nonsense, the ridiculous regard they deserve……

    But… We have had down futures maybe 1 in every 5 days since this Baby Bear market started. This seems improbable to me… And honestly I’m not keeping a legitimate count on the futures at the open.. so maybe I’m Wrong(wouldn’t be the first time)

    The Fed Leaked that nonsense about “some Action” after the market closed… To Whomever…. I’m First curious if it was the Reserve or the federal Government. IE.. Treasury or the Reserve.

    The idea, that without notice in the Reserve Statement.. or as an addendum to it, Claiming that they wanted to make sure that “the affected markets were open when they made the statement”
    ….
    With the Exception of the U.S. Stock market, Giving us 30 minutes to react in only a Knee-Jerk way…..I spent 10 of those minutes with my mouth open with drool coming out, as I reacted to the move in the futures

    The futures jumped 200 points in a minute and a half, I have never seen that fast of a reaction, Especially to something unknown.

    When the fed gave us that .50 surprise rate cut in august, the move was only 350 points.. The reaction to that news was on par with a Surprise rate cut, and it wasn’t one.

    I guess what I’m getting at is that this does add some “Slight”, Very “Slight” credibility to the idea that the Plunge protection team, is taking an active roll in manipulating the market.

    The Hubris involved, could only come from a former a certain Goldman CEO, Thinking he is a “Master of the Universe” Backed with the support of our Smirking Chimp-in chief.

    A kind of market Hubris, reminds me of of “Portfolio Protection

    in a minute and a half, I can neither make a decision what price to place an order at, Nor place the order with my brokerage…. That order was ready to execute the exact second of the announcement, calculated by an atomic clock.

    The idea that someone actually read and understand a notice that it took most the market all day to digest.

    Add the idea, that whoever this Genius, Brilliant Market Timer was… Lost their shirt in the first 30 minutes of the open.

    As clog ed as the market was at the open, I can’t imagine that they could have made money even if they had sent in a Market sell 15 minutes into the open.

    Maybe it can be accounted for by someone Prepping to buy all pre market futures under 200, then immediately dumping them in the regular market over 250… Also giving us the massive sell after the open.

    Maybe the black helicopters just have me this evening…. but it does sort of smell like a well executed attempt to create a short covering rally…. wouldn’t be the first time.

  9. Eric Davis commented on Dec 13

    Course, let this morning futures let my thesis down :)

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