Tag: george yacik

Coming Soon: Uncle Sam's Credit Cards

Posted on by George Yacik

George Yacik - INO.com Contributor - Fed & Interest Rates


If you were in the market for a new credit card or needed a loan to buy a car, would you think to go to some federal agency to get one?

Not right now, maybe, but we seem to be headed in that direction—and very quickly, too.

And the idea isn’t all that far-fetched when you come to think of it. The federal government is already heavily involved in consumer lending, either directly or indirectly. It’s the biggest player by far in the two biggest consumer loan businesses. Getting into new areas like credit cards and auto loans isn’t a terribly big leap.

It’s fairly safe to say that the residential mortgage market would barely exist were it not for the government-sponsored enterprises like Fannie Mae and Freddie Mac, plus other government agencies like the FHA, VA, and USDA. While these agencies don’t make loans themselves, they buy them from private lenders, stamping a federal guarantee on them in the process. Before the global financial crisis, there was a thriving market for private mortgages through a private secondary market, but since then that market has largely ceased to exist, except for a smattering of securities backed by jumbo loans, those too large for the federal agencies to buy. That leaves the government with about a 90% or more market share. Prior to the financial crisis, the government still commanded a market share of about 50%. Continue reading "Coming Soon: Uncle Sam's Credit Cards" →

Same Old, Same Old From The Fed

Posted on by George Yacik

George Yacik - INO.com Contributor - Fed & Interest Rates


If we’re to believe the financial press, there is at least a 50-50 chance the Federal Reserve will raise interest rates at its next meeting on September 20-21. I’ll believe it when it actually happens – but not a minute before then.

The Wall Street Journal story on the release of the minutes of the Fed’s July 26-27 meeting last week, written by its senior Fed watcher Jon Hilsenrath, said the Fed announcement “suggested a rate increase is a possibility as early as September, but that the Fed won’t commit to moving until a stronger consensus can be reached about the outlook for growth, hiring and inflation.”

But haven’t we heard that before? All the Fed did was provide more of the same “let’s wait and see what happens before we do anything” prevarications.

“Members generally agreed that, before taking another step in removing monetary accommodation, it was prudent to accumulate more data in order to gauge the underlying momentum in the labor market and economic activity,” the Fed minutes actually said. “Members judged it appropriate to continue to leave their policy options open and maintain the flexibility to adjust the stance of policy based on incoming information.”

Sound familiar? Continue reading "Same Old, Same Old From The Fed" →

The Bond Market Gets Curiouser and Curioser

Posted on by George Yacik

George Yacik - INO.com Contributor - Fed & Interest Rates


Sometimes the smartest thing is to do nothing.

This column has been pretty harsh on the Federal Reserve for its failure to start tightening monetary policy, as it sort of promised it would back in December. Since then, there’s been a steady stream of “yes we will, no we won’t” pronouncements from the Fed – both from the Fed itself and its individual members – that have left investors confused about the direction of U.S. monetary policy. Now, nine months later, the Fed has still not made the next move in “normalizing” interest rates.

A Reuters survey released last week found that 69 of 95 – that’s nearly three out of four – economists don’t expect the Fed to raise rates until December, after the presidential election, followed by two more hikes next year. We’ll see. Continue reading "The Bond Market Gets Curiouser and Curioser" →

Will We See The Fed In September?

Posted on by George Yacik

George Yacik - INO.com Contributor - Fed & Interest Rates


It took less than two days last week for the financial markets to disabuse themselves of the notion that the Federal Reserve, this time, is really, truly, absolutely kind of serious about raising interest rates at its next meeting in September.

On Wednesday afternoon the Fed, as expected, left interest rates unchanged for the fifth straight monetary policy meeting since first raising rates last December, which was supposed to usher in a gradual process of rate “normalization” this year. As we know, of course, the Fed hasn’t followed through on that, finding one justification after another – rising oil prices, falling oil prices, weak Chinese economic growth, weak U.S. economic growth, Brexit, you name it – to delay the day of reckoning.

In last week’s post-meeting announcement, the Fed dropped several hints that might cause some people, even reasonable ones, to conclude that a rate increase might be in the offing at its next meeting in September. Continue reading "Will We See The Fed In September?" →

When Did Market Stability Become A Fed Mandate?

Posted on by George Yacik

George Yacik - INO.com Contributor - Fed & Interest Rates


According to the Federal Reserve Act, in which Congress created the Federal Reserve System back in 1913, the U.S. central bank was given the following statutory objectives for conducting monetary policy: maximum employment, stable prices and moderate long-term interest rates.

The Fed has since given itself an additional mandate: market stability. Congress didn’t grant the Fed that power, but that seems to be the Fed’s overriding concern lately. In the process, it’s succeeded in creating what some very smart people believe is the biggest bond bubble of all time, and a pretty big one in equities, too. It’s pushed more and more of the country’s wealth into the pockets of the so-called 1%. It’s also given some people a false sense of financial security that the Fed has created a floor – a guaranteed return, if you will – under which investment returns will not be allowed to fall. Continue reading "When Did Market Stability Become A Fed Mandate?" →