Why the Federal Reserve should buy national infrastructure bonds

By Cate Long
December 28, 2012

The Federal Reserve is in the middle of a third round of bond buying that is commonly called quantitative easing (or QE3). The goal is to suppress interest rates, and it was the main monetary policy tool that the Fed began using in December 2008 to support the financial system during the credit crisis. The financial system has returned to racking up record-breaking profits, and the Fed has shifted the purpose of QE to propping up the housing system and the general economy.

We shouldn’t dread the debt limit

By Cate Long
May 17, 2012

“Have a drink out there, folks, and just know that your kids and grandkids will be out there picking grit with the chickens,” says former U.S. Senator Alan Simpson in the video above. Simpson’s quip is the best summary I’ve ever heard of the public’s lack of understanding of the severity of the nation’s fiscal crisis. The federal government is currently borrowing 42 cents of every dollar that it spends. Thanks to the Federal Reserve’s quantitative easing and the strong global demand for U.S. Treasury debt, the nation has been able to borrow heavily at low interest rates to cover its budget shortfalls.

Troubles in Volcker land?

By Cate Long
March 7, 2012

My post last week about ditching the Volcker Rule and returning to some form of Glass-Steagall got a lot of positive responses. Back then I wrote that the Volcker Rule, which requires regulators to cleave risky trading for a bank’s house account from deposits insured by the FDIC, is immensely complex and that it will never be properly defined or enforced. Several regulators in the past week have agonized publicly over the need to get the rule “right.”

Forget Volcker — bring back Glass-Steagall

By Cate Long
March 1, 2012

Imagine you are a financial regulator whose agency is underfunded, understaffed and under-trained and that firms under your jurisdiction are likely to pick off your best employees by offering them triple the salary you pay them.

The ability to think and generate new ideas

By Cate Long
February 17, 2012

The research department of the Federal Reserve Bank of New York released an interesting paper this week entitled “How Colleges and Universities Can Help Their Local Economies” (the video above is a good summary). The work centers on two ideas: 1) graduates can join the region’s educated workforce and contribute to economic growth; and 2) “human capital” is expanded when institutions team up with local business, or attract new businesses, to commercialize technology developed at the school.

Muniland: the big picture (part 1)

By Cate Long
January 26, 2012

A lot of municipal bond reporting zooms in on particular issuers or sectors and assumes that the reader understands the broader market. But the municipal bond market is foreign to most people, and I thought that it might be useful to sketch out the bigger picture. Here are some quick bullet points:

When home prices and property taxes diverge

By Cate Long
December 28, 2011

The latest S&P/Case-Shiller Home Price Index, released yesterday, wasn’t pretty. Housing values continued to fall, their 5th consecutive year-on-year decline. (You can download the data here). The Federal Reserve Bank of Cleveland had this to say about the release:

Found: $840 billion in municipal bonds

By Cate Long
December 9, 2011

The Federal Reserve has quietly admitted they had undercounted about $840 billion of municipal bonds. Bloomberg reports on this new pile of assets:

The Fed’s data snafus

By Cate Long
October 23, 2011

Most everyone knows that the Federal Reserve Board is responsible for making monetary policy, handling prudential oversight of many of the nation’s banks and keeping the clearing and payment system flowing. But the Fed has another fundamental function that often goes unnoticed: collecting financial and economic data.

Vermont rebuilds while Congress fights

By Cate Long
September 21, 2011

The state of Vermont is struggling to gather funds to repair the flood damage from Hurricane Irene, the state’s worst natural disaster since the floods of 1927. Generally the state would rely on support from the federal government to replace and repair this infrastructure, but the U.S. Congress is locked in a fight over funding the Federal Emergency Management Agency as part of a larger fiscal battle that could shut down the federal government. From CBS News: