Mind Over Market

To maintain the Fed’s independence in monetary policy and its ability to successfully fight inflation (and deflation) the Fed and the Treasury need to sign a Federal Reserve Credit Policy Accord, says economist Marvin Goodfriend. He offers six principles to guide such an accord. By Robert Stowe England April 25, 2009 A call for a Federal Reserve Credit Policy Accord between the Fed and the U.S. Treasury was issued yesterday (April 24) by Marvin Goodfriend, professor of economics and chairman of the Gailliot Center for Public Policy at the Tepper School of Business at Carnegie-Mellon University in Pittsburgh. He was speaking at a symposium conducted by the Shadow Open Market Committee ( http://www.somc.rochester.edu/ ) at Cato Institute in Washington, D.C. Goodfriend’s concern was aimed at the Fed’s decision to provide more than $1 trillion of credit through the Term Asset Lending Facility (TALF) and other arrangements. The effort includes loans to banks and other financial institutions...

Mortgage finance experts, regulators, lawmakers and industry groups are wrestling with the challenge of remaking the secondary mortgage market into a sustainable model for the long term. By Robert Stowe England Mortgage Banking, April 2009 For printable copy, click this link: http://robertstoweengland.com/documents/RevivingTheSecondary.pdf Trust -- once it's lost, how do you get it back? For the world of mortgage finance, that is the paramount question. It is essential to the success of any efforts at reviving the secondary mortgage market on a sustainable basis with and without a federal government role. Restored trust is essential in the near and mid-term to restarting the private-label mortgage-backed securities (MBS) market, which collapsed in August 2007. That is the part of the secondary market reserved for jumbo prime, alternative-A and subprime loans -- the loan products that made up the once formidable private-label MBS market. And restored trust is essential in the longer...

Q&A with Robert D. Arnott This prominent financial analyst contends that the ‘cult of equities’ has obscured for many the importance of bonds, which can outperform equities for extended periods of time. By Robert Stowe England April 18, 2009 Highlights of Arnott’s Study and the Q&A Below In an article published in the Journal of Indexes , Rob Arnott reports two key findings from his fresh review of the historical performance data comparing returns on stocks with yields on 20-year Treasuries over the very, very long term, from 1803 to February 2009. The article is titled “Bonds: Why Bother?” and is available on line at this link: http://www.indexuniverse.com/publications/journalofindexes/articles/149-may-june-2009/5710-bonds-why-bother.html The first significant finding is that there are long periods during which bonds outperform stocks: namely, 1803-1871, 1929-1949 and the period from 1968 to February 2009. The second notable finding is that while stocks still outperform bonds ...

Q&A with Allan H. Meltzer This leading monetary policy scholar contends that the Geithner plan, like the bank rescue efforts of earlier Administrations, is part of a flawed and unsustainable approach where 'the bankers make the profits and the public, the taxpayers, take the losses.' April 2, 2009 By Robert Stowe England Allan H. Meltzer is professor of political economy at Carnegie Mellon University's Tepper School of Business in Pittsburgh, Pennsylvania. Born in 1928, he is widely viewed as one of the foremost experts on monetary policy. He served on the Council of Economic Advisors for both Presidents Kennedy and Reagan. Meltzer also served as chairman of the Shadow Open Market Committee from 1973 to 1999. The SOMC is a group of economists, analysts and bankers who meet periodically to discuss, evaluate and comment on the actions of the Federal Reserve's Federal Open Market Committee. For more than two decades, Meltzer has also been a visiting scholar at the Amer...