Financial Regulatory Forum

Fed’s Rosengren endorses contingent capital idea

PHILADELPHIA, March 3 (Reuters) – Boston Federal Reserve Bank President Eric Rosengren said on Wednesday that he “strongly endorses” the idea of requiring banks to hold debt that converts into equity during times of duress.

“Contingent capital is an important part of the solution,” Rosengren told a Global Interdependence Center conference in Philadelphia in response to a question from the audience.

Answering a separate question, Rosengren said it was important that countries coordinate their policies on how to deal with firms seen as too big or interconnected to fail.

But he stressed this was difficult and was likely to take time, especially given that the United States has yet to pass domestic regulatory reform.

Rosengren’s comments come as Congress debates financial regulatory reform proposals. Senate Banking Committee Chairman Christopher Dodd has been expected to unveil revised legislation this week, with a possible vote by the banking panel in mid-March and Senate floor action in April or May. (Reporting by Kristina Cooke; Editing by James Dalgleish)

INTERVIEW-Rep Frank: Fed as consumer watchdog home a “joke”

WASHINGTON, March 2 (Reuters) – Representative Barney Frank, chief architect of financial reform in the U.S. Congress, told Reuters on Tuesday he “thought it was a joke” when he learned key senators were discussing putting a new financial consumer watchdog inside the Federal Reserve.

“I thought it was a joke at first, to be honest, with all this denunciation of the Fed,” Frank said in an interview.

“If that’s the price of a Republican deal, then it’s not a good deal and the House wouldn’t accept it,” he said.

Kocherlakota: Fed’s bank supervisory powers critical

kocherlakota    By Ann Saphir
   MINNEAPOLIS, March 2 (Reuters) – Supervisory powers over banks are critical for the Federal Reserve to do its job, Minneapolis Fed President Narayana Kocherlakota said on Tuesday. (more…)

BREAKINGVIEWS – Markets right to take Fed move badly

– The author is a Reuters Breakingviews columnist. The opinions expressed are his own –

 

By Edward Hadas

LONDON, Feb 19 (Reuters Breakingviews) – The Federal Reserve deserves some sympathy. The U.S. central bank did everything it could to stage-manage its minimal tightening moves, announced late on Feb. 18. But markets reacted as if to serious bad news.

The changes really are small. The main one was to increase the Fed’s discount rate, which is not currently crucial to the financial system, by a token quarter of a percentage point.

Fed mulling debt sales as U.S. economy recovers

By Pedro da Costa and Mark Felsenthal

WASHINGTON, Feb 17 (Reuters) – Several Federal Reserve policymakers want to begin selling securities relatively soon to cut back on the massive amount of cash they have poured into the financial system, the U.S. central bank said on Wednesday.

Minutes of the Fed’s latest policy meeting in January suggested officials remain positive about the economy’s prospects even as they worry about the impact of an elevated unemployment rate, which they see holding near the current 9.7 percent through 2010.

The minutes offered a window into the Fed’s thinking on how best to withdraw the extraordinary stimulus it has provided the economy, but also revealed substantial disagreement among officials on the timing and sequencing of exit steps.

Bernanke lays out vision for Fed monetary exit

Eyes on the punch bowl

Eyes on the punch bowl

By Mark Felsenthal

WASHINGTON, Feb 10 (Reuters) – Federal Reserve Chairman Ben Bernanke on Wednesday detailed how the U.S. central bank will begin to wean the economy off its extraordinary stimulus, even as he stressed it was not yet time to do so.

Bernanke said the Fed would likely begin tightening monetary policy by removing cash from the financial system before it turns to raise benchmark short-term interest rates.

In his most comprehensive description to date of how the Fed aims to dismantle its extensive emergency economic supports, he also said the central bank could soon raise the discount rate it charges banks for emergency loans, but stressed that would not be akin to a tightening in monetary policy.

Fed’s Kohn warns on interest rate risk

By Karey Wutkowski

ARLINGTON, Va., Jan 29 (Reuters) – A senior U.S. Federal Reserve official warned on Friday that the uncertain path of interest rates poses risks for banks inattentive to the match of durations among their assets and liabilities.

Federal Reserve Vice Chairman Donald Kohn told a conference sponsored by the Federal Deposit Insurance Corp that the usual uncertainty about interest rates in coming months is compounded in the current situation by the fact that rates are near zero and the Fed has massively expanded the amount of reserves in the banking system.

“Borrowing short and lending long is an inherently risky business strategy,” Kohn said. “Intermediaries need to be sure that as the economy recovers, they aren’t also hit by the interest rate risk that often accompanies this sort of mismatch in asset and liability maturities.”

US Senate backs Bernanke for second term at Fed

By Mark Felsenthal and Thomas Ferraro

WASHINGTON, Jan 28 (Reuters) – The U.S. Senate on Thursday approved Ben Bernanke’s nomination to a second four-year term running the Federal Reserve, the world’s most powerful central bank, despite deep misgivings over his perceived policy missteps.

The Senate voted 70-30 to confirm Bernanke, after clearing a procedural hurdle with the support of 77 senators.

Bernanke won the Senate’s needed backing despite the stiffest opposition to any nominee for Fed chairman in the nearly 32 years the Senate has voted on the position.

Major central banks to end emergency dollar lending

By Kristina Cooke and Marc Jones

NEW YORK/FRANKFURT, Jan 27 (Reuters) – Major central banks on Wednesday said they will stop the emergency U.S. dollar lending introduced during the financial crisis, a significant milestone indicating growing confidence that the financial system is returning to health.

The decision, announced in coordinated statements, marked the first unified retraction of central banks’ extraordinary support for financial markets.

The European Central Bank, the Bank of England, the Bank of Japan and the Swiss National Bank, as well as the central banks of Canada, Australia, New Zealand, Mexico, Brazil and Sweden said they will let their dollar “swap” arrangements with the U.S. Federal Reserve expire on Feb. 1.

Bernanke confirmation shakier as more Democrats defect

By Thomas Ferraro and Pedro da Costa

WASHINGTON, Jan 22 (Reuters) – Ben Bernanke’s nomination for a second term as U.S. Federal Reserve chairman, once seen a sure thing, appeared increasingly under threat on Friday after two Senate Democrats said they would vote against it.

“I believe there will be the votes to confirm him, but it’s going to be very close,” a senior Democratic leadership aide said.

With the U.S. job market in disarray, voters angry at Wall Street firms and members of Congress worried about their re-election in November, the Fed and its chairman have become targets for discontent.

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