YouSaid · the spoken record

Lou Crandall

lines on the record: 94
first: 2023-04-10
most recent: 2023-04-10
sittings or episodes: 1
sources: podcast

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“Money is just flowing in to the reverse repo facility, and they want to make it less attractive so that some of the liquidity goes back into the bank sector. So, Joseph, really, you know, break it down for me and the audience about the floor of rates. You've talked about it before, but yeah.”
2023-04-10 · Forward Guidance · Lou Crandall & Joseph Wang: A Monetary Plumbing Masterclass · IDENTIFIED FROM THE TRANSCRIPT
“Returns that are below the RP floor, which jeopardizes the Fed's ability to control interest rates. And I totally agree. That's definitely a red line that the Fed will not cross. And furthermore, in practice, when I look through the past few years, the RRP is in practice a full allotment facility. If anyone ever gets too close to the counterparty limit, okay, if too many people get too close to the counterparty limit, they just lift it. And that's what they've consistently done. Similar for lowering the IRP rate as well. I mean, if you lower the RRP rate, it seems like all the other money market instruments would also trade lower as well. So it doesn't necessarily make it relatively less attractive.”
2023-04-10 · Forward Guidance · Lou Crandall & Joseph Wang: A Monetary Plumbing Masterclass · IDENTIFIED FROM THE TRANSCRIPT
“Exactly. So I think just Lou Broadley mentioned there are people who want to get rid of, make sure the RP is a bit smaller and they propose two potential ways of doing it. One as Lou alluded to is reducing the counterparty limits to the RRP. That way you kind of force people to, let's say someone wanted was investing $60 billion a day. If you shrink the cardi limit to 30 billion a day, then that means that the RP mechanically has declined because the guy who wants to put was putting 60 billion in can now only put 30 billion in. And so that is a way to mechanically shrink the RRP. But as Lu alluded to, it's very clumsy and it violates one of the key reasons that the RP exists, that is rate control. So if you were putting 60 billion in, now you can only do 30 billion. Well, you have to take that 30 billion imbalances and you have to put it somewhere in the money market universe. That means that you'll likely have to accept.”
2023-04-10 · Forward Guidance · Lou Crandall & Joseph Wang: A Monetary Plumbing Masterclass · IDENTIFIED FROM THE TRANSCRIPT
“When there's an extreme, it's going to break because people are going to be unable in those extreme conditions to get as much investment capacity as they need that day. Market rates will plunge. There may be circumstances in which you want market rates to plunge, but putting arbitrary restrictions on the amount of cash that can go into the RRP facility is essentially partially dismantling. Your interest rate floor. And since the central bank doctrine for a number of decades now has been to try to achieve one of the ways central banks measure themselves in terms of monetary policy. Transmission is their ability to control short-term interest rates effortlessly. And that's what the ROP facility allows you to do.”
2023-04-10 · Forward Guidance · Lou Crandall & Joseph Wang: A Monetary Plumbing Masterclass · IDENTIFIED FROM THE TRANSCRIPT
“Most of my career and all of yours has been based around the idea that you want to stabilize overnight interest rates and you want to exercise as much control as possible. When you start talking about putting restrictive counterparty limits, the current county counterparty limits in the RFP facility are very, very remote backstop that have very limited impact on total volume of activity. If you start thinking about trying to force money out of the RRP facility by having smaller limits, then what you're essentially saying is that the facility will work as a floor pretty much all the time except when you really need it.”
2023-04-10 · Forward Guidance · Lou Crandall & Joseph Wang: A Monetary Plumbing Masterclass · IDENTIFIED FROM THE TRANSCRIPT
“Policy needs, the need to buy securities during the pandemic, which was originally driven by the need to stabilize the Treasury securities market because it was at the breaking point. You ought to be able to do that without having to worry about how you're going to stabilize it to keep all of the other parts of your complex interactions with the financial system running smoothly. RP facility Now, people will make the point, it's a very fair point that what that means, the fact that it's a fixed rate, full allotment, up to your counterparty limit facility means that it takes interest rate elasticity out of that part of the market. You know, central bank policy In for”
2023-04-10 · Forward Guidance · Lou Crandall & Joseph Wang: A Monetary Plumbing Masterclass · IDENTIFIED FROM THE TRANSCRIPT
“We tend to think about the Fed's balance sheet policy in very stylized terms, that it's doing things for one reason. But every aspect of the Fed's operations interacts with the economy and the financial system in a number of different ways that are very complex. When it buys Treasury securities in the market, it at the same time creates new reserves which adds to the supply of liquid balances, but it's also taking interest rate risk out of the market and lowering, flattening the yield curve and supporting economic activity. Alternatively, when they do emergency lending, they are promoting financial stability. They're shoring up in individual institutions. But again, they're supplying liquidity into the market. You want a framework where they can respond to those”
2023-04-10 · Forward Guidance · Lou Crandall & Joseph Wang: A Monetary Plumbing Masterclass · IDENTIFIED FROM THE TRANSCRIPT
“And it's such an arbitrary number that it does make you think that that was a scenario that was carefully worked through. I would say issue another one to one and a half trillion of bills, at least half of which would probably come out of the RRP facility. But the RRP facility itself is an enormous source of flexibility.”
2023-04-10 · Forward Guidance · Lou Crandall & Joseph Wang: A Monetary Plumbing Masterclass · IDENTIFIED FROM THE TRANSCRIPT
“If the treasury were operating with no constraints, I think the supply of bills would be a trillion dollars higher today than it is, and they've said that they want to increase bills as a percentage of the total public debt. constraints on the supply of bills are not the single biggest reason to regret the fact that the debt ceiling exists, but it does. And that's been a major reason why they haven't been able to achieve their bill supply, their bill issuance objectives. Sure, if you talk to Fed officials, I have this sneaky suspicion that at some point over the past year, the staff did a presentation for the FOMC showing what would happen to the RRP facility if the Treasury issued an extra half trillion dollars of bills. Because when you talk to Fed staffers, they always come back to this point, well, if only there were an extra half trillion bills out there.”
2023-04-10 · Forward Guidance · Lou Crandall & Joseph Wang: A Monetary Plumbing Masterclass · IDENTIFIED FROM THE TRANSCRIPT
“The argument, the more emphatic arguments that are being made right now is that the deposit drain itself is just an existential threat to certain classes of banks. If that's true, given that there's been some visibility about this for a while, that's a real failure in risk management. That doesn't mean the Fed can ignore it if they think it's going to break so many banks that it's going to fundamentally alter the trajectory of the economy. It needs to take that into account, not to save the banks, but to take into factor that into its economic forecasts. I don't think it's that extreme at this point. But again, I didn't see Silicon Valley coming.”
2023-04-10 · Forward Guidance · Lou Crandall & Joseph Wang: A Monetary Plumbing Masterclass · IDENTIFIED FROM THE TRANSCRIPT
“The data they were seeing in real time was showing them that overdrafts were creeping up steadily before we had that huge money market spike in September of 2019, which was the previous instance Of exactly the kind of scenario that you're describing. So they're going to have some indication as they're getting closer. I don't think we're there yet.”
2023-04-10 · Forward Guidance · Lou Crandall & Joseph Wang: A Monetary Plumbing Masterclass · IDENTIFIED FROM THE TRANSCRIPT
“It would change the incentives enough to start steering some money back into bank reserves as we get closer to what might turn out to be the lowest efficient level of reserves. You're right. We cannot know where that is. The only thing we do know is that you don't want to find out where it is the hard way, which means you want to stop well before you get into something that looks like the danger zone. There are some early signs that the Fed can monitor to see if we're getting close. They have internal data, for instance, on the volume of daylight overdrafts at banks, which are very, very low because reserve balances are so platiful. But what we found in 2019, or as we learned in 2020 from the data the Fed was eventually generous enough to share with us after the fact.”
2023-04-10 · Forward Guidance · Lou Crandall & Joseph Wang: A Monetary Plumbing Masterclass · IDENTIFIED FROM THE TRANSCRIPT
“That is certainly a scenario that the Fed has to be very mindful of and has to monitor on an ongoing basis. I don't think we're close to that yet. And for one of the difficult things about this particular debate for me is that for some time I thought it would be a very reasonable thing to do to widen the spread between the IOER or also the interests on reserve balances, the IORB, and the rate paid on the repo facility. Right now, that spread is just 10 basis points. I think going back out to 25 would alter the economics of this enough to start, you know,”
2023-04-10 · Forward Guidance · Lou Crandall & Joseph Wang: A Monetary Plumbing Masterclass · IDENTIFIED FROM THE TRANSCRIPT
“Money goes into the reverse repo facility, it takes reserves out of the baking sector and into the reverse repo facility. So you could have a situation where everyone does this and the bank sector gets very low on cash, falls below the lowest comfortable level of reserves and ends up with some kind of plumbing problem that could cause rates to spike. So it's kind of like a bottomless hole that can drain all this money and the Fed doesn't have complete control over it because deposits have the ability to take money out of a bank and put it into a money market fund which then puts it into the reverse repo facility.”
2023-04-10 · Forward Guidance · Lou Crandall & Joseph Wang: A Monetary Plumbing Masterclass · IDENTIFIED FROM THE TRANSCRIPT
“Lowest comfortable levels of reserves to function. The Fed doesn't really know where that is, but more importantly, the Fed doesn't actually have complete control over how many reserves are in the banking system. Because if you are a deposit, Money market fund then can take that money and put it in the reverse repo facility. So if the reverse repo facility is offering a very, very attractive interest rate and you could say that it is right now, then I think there is a possibility that everyone takes their money out of a bank, puts it into a money market fund and ends up putting it into the reverse repo facility.”
2023-04-10 · Forward Guidance · Lou Crandall & Joseph Wang: A Monetary Plumbing Masterclass · IDENTIFIED FROM THE TRANSCRIPT
“So the way the Fed looks at the banking system, the Fed thinks that the banking system needs a certain minimum amount of cash in order to function well. And that's what they think of as the lowest. Lowest level of reserves”
2023-04-10 · Forward Guidance · Lou Crandall & Joseph Wang: A Monetary Plumbing Masterclass · IDENTIFIED FROM THE TRANSCRIPT
“To want to satisfy that demand, regardless of what the Treasury Zone interest rate models were telling it from a pure interest rate risk management perspective, it didn't necessarily want as many of its securities transformed into an implicit FRN, as was the case. But I think the stability benefits of having that money someplace safe where it's not going to be in a runnable investment vehicle are very great.”
2023-04-10 · Forward Guidance · Lou Crandall & Joseph Wang: A Monetary Plumbing Masterclass · IDENTIFIED FROM THE TRANSCRIPT
“Would have to go somewhere. And the private sector, who's demonstrated decade after decade that it's just really bad at creating safe liquid instruments, that back in the great financial crisis, you ask any derivatives trader at a dealer bank from the great financial crisis, and they'll say, yeah, we securitized everything that was reasonable to securitize, and then we kept going because there just weren't enough assets. And so you end up securitizing subprime mortgages. And that is always a recipe for disaster. The fact that we are so bad, the fact that there is always a huge demand for safe assets. And that demand is not going anywhere really does make it reasonable for debt managers.”
2023-04-10 · Forward Guidance · Lou Crandall & Joseph Wang: A Monetary Plumbing Masterclass · IDENTIFIED FROM THE TRANSCRIPT
“While the Fed wanted to take that duration out of the market to flatten the yield curve and encourage an economic recovery. But going back to the point about bills as a public good, I really do think that it's... That there is a public policy benefit to providing an adequate supply of government guaranteed safe assets. In this world, a lot of people would argue for moving the RRP, not a lot of people, some very vocal people would argue for cutting the RRP rate to punitively low levels to force money out of the RRP facility.”
2023-04-10 · Forward Guidance · Lou Crandall & Joseph Wang: A Monetary Plumbing Masterclass · IDENTIFIED FROM THE TRANSCRIPT
“That is all quite true, but I'm going to put it offer a slightly different take on all of this. I think Treasury bills are. A public good and I think the world is a safer place when there's an adequate supply of treasury bills or treasury bill equivalents, which is what the RRP facility is. And you're quite right about the debt management implications of this back during the Great Financial Crisis. There was an awful lot of discussion about the fact that the Treasury was aggressively extending the average maturity of its debt while the Fed was busily buying it back in the open market. And why were these two agencies working across purposes, which in that era, they unequivocally were. And the answer was very simple, going back to the issues we face in the great financial crisis. The Fed did not want to become Japan. And the Treasury did not want to become Greece. So the Treasury wanted to reduce its role over risk by locking in longer-term debt.”
2023-04-10 · Forward Guidance · Lou Crandall & Joseph Wang: A Monetary Plumbing Masterclass · IDENTIFIED FROM THE TRANSCRIPT
“Say hire for Because in effect, you are when interest rates sort of when the 30 year interest rate was really low, it would have been smart to kind of issue a whole lot of Lombardy debt to lock in those interest rates. But you kind of did the opposite of prudent debt management. And instead, you basically borrowed on a fully rate basis. And if inflation is not transitory, whoa, man, that's going to cost the Federal debt to interest expense to be very expensive going forward.”
2023-04-10 · Forward Guidance · Lou Crandall & Joseph Wang: A Monetary Plumbing Masterclass · IDENTIFIED FROM THE TRANSCRIPT
“If you think it was reasonable from a public policy perspective to try to lower long term interest rates by having the federal government issuing less at a time of economic strain, then you really don't care which agency did it. And the RRP facility has been an extremely efficient vehicle for meeting public demand for high quality, safe, short-term assets, it's been very effective, I think.”
2023-04-10 · Forward Guidance · Lou Crandall & Joseph Wang: A Monetary Plumbing Masterclass · IDENTIFIED FROM THE TRANSCRIPT
“Safe short term assets if the Treasury have met that through Treasury bills rather than the Fed doing that through the issuance of interest-bearing liabilities, the net outcome for the taxpayer would have been exactly the same as what we have now, except we wouldn't be having these debates about, well, the Fed lost money. But yeah, but the Treasury made a bunch of money and it all nets out because the Fed never gets credit for the money the Treasury saved on the other side of this. But really when you think about this, when you think about debt management and the management of the central bank portfolio in an integrated sense, the”
2023-04-10 · Forward Guidance · Lou Crandall & Joseph Wang: A Monetary Plumbing Masterclass · IDENTIFIED FROM THE TRANSCRIPT
“Well, I look at it differently. I looked at it in terms of current interest expense. And, you know, so the Fed's earnings go down. Right now, that's not being recognized because they can't actually ask the Treasury to cut the check for their negative interest earnings. But if the same thing had been achieved by the Treasury not extending the average maturity of the debt, back during the pandemic, not introducing a 20-year bond. And it simply ramped up.”
2023-04-10 · Forward Guidance · Lou Crandall & Joseph Wang: A Monetary Plumbing Masterclass · IDENTIFIED FROM THE TRANSCRIPT
“Lou, you're saying there's an argument saying, oh, Treasury has issued 30-year debt and some of that is owned on the Fed's balance sheet. Therefore, the Fed has long-duration debt. You're saying in practice the Federal Reserve is financing that purchase with overnight borrowings in the same way a bank, let's say, purchase, fund a purchase of a 30-year treasury with overnight borrowings. And therefore, that if you combine the Fed and the Treasury together, the duration is much shorter. Although the Federal Reserve can bear all the losses and have a sort of...”
2023-04-10 · Forward Guidance · Lou Crandall & Joseph Wang: A Monetary Plumbing Masterclass · IDENTIFIED FROM THE TRANSCRIPT
“Because the interest exposure on what the Fed has done is transformed that part of the Treasury's interest exposure from long-term fixed rate debt to a floating rate instrument, which where the cost is a blend of the IOR that we were just talking about and the RRP rate, that's a much more useful analytical measure of what the average maturity of the U.S. public debt is, but a lot of the debate here changes when you start thinking of everything in terms of a consolidated U.S. government portfolio or balance sheet. And the Fed using short-term liabilities to finance part of the public debt is simply transforming Treasury debt management.”
2023-04-10 · Forward Guidance · Lou Crandall & Joseph Wang: A Monetary Plumbing Masterclass · IDENTIFIED FROM THE TRANSCRIPT
“Well, can I break in there They're not funding the Fed, they're funding the Treasury because they are funding the Fed's purchases. I mean, right now, obviously, they're also funding the lending programs. But the origin of all of this was the huge expansion of the Fed securities portfolio. And there's been an interesting twist on the Treasury side that the Treasury starting a couple of quarters ago in its quarterly refunding announcements started publishing a new series on the average maturity of the public debt. And the new series includes the Fed support, adds the Fed's portfolio to private holdings of securities, except the Fed's portfolio is treated in this calculation as one big floating rate node.”
2023-04-10 · Forward Guidance · Lou Crandall & Joseph Wang: A Monetary Plumbing Masterclass · IDENTIFIED FROM THE TRANSCRIPT
“So, when people say the Federal Reserve is raising rates, it's implied it's kind of just one rate, but it's just a whole suite of rates that kind of move in lockstep. There's the Fed funds rate, which is between a range. That's what the Federal Reserve, the action used to be in that before the great financial crisis. Folks were very familiar with Joseph Works know that now a lot of it is in the reverse repo facility. And then there's interest on excess reserves. So that is essentially practically a deposit facility for people they could just park their money at the Fed reverse repo. Effectively, they're lending to the Fed as if the Fed needs money against their collateral. But we can think of them and if you disagree, you can share as they're funding the Fed.”
2023-04-10 · Forward Guidance · Lou Crandall & Joseph Wang: A Monetary Plumbing Masterclass · IDENTIFIED FROM THE TRANSCRIPT
“Without a doubt that as rate differentials become more extreme, the incumbency advantage of your existing bank eventually becomes overwhelmed by the financial incentive to move.”
2023-04-10 · Forward Guidance · Lou Crandall & Joseph Wang: A Monetary Plumbing Masterclass · IDENTIFIED FROM THE TRANSCRIPT
“Guess you have a kind of a home advantage, a bank has a home advantage to keep its depositors, but if the rate difference is too large, then maybe that will change the psychology a bit, like Lou mentioned, that people are actually willing to move somewhere else despite all the inconvenience of having to go through that process.”
2023-04-10 · Forward Guidance · Lou Crandall & Joseph Wang: A Monetary Plumbing Masterclass · IDENTIFIED FROM THE TRANSCRIPT
“I think another good point is that technology has also allowed us to spread information about banks much more quickly than in the past. I remember that people involved with Credit Suisse was basically blaming social media for spreading fears about banks and precipitating its downfall. So I think technology not only allows people to more easily switch from, let's say, a low yielding deposit account to a higher yielding deposit account elsewhere, but it also allows fears to spread in a way that it probably wasn't possible in the past. Now banks, though, they compete not just on rates, but also a suite of other services as well. If you are a bank, let's say you have a checking account with a bank to switch that, it's kind of a hassle. Let's say you have direct deposit set up with it. Let's say you have it set up with all your other bells, your credit card bills, your mortgages and so forth. So you have the benefit of.”
2023-04-10 · Forward Guidance · Lou Crandall & Joseph Wang: A Monetary Plumbing Masterclass · IDENTIFIED FROM THE TRANSCRIPT
“slow to adjust because it's so cumbersome to type in all those new account numbers in your phone. And that as a result, they'd be able to get away with just extracting a little more premium by not passing through Fed rate hikes to depositors. And then all of a sudden, you found out that that was very true up until it wasn't, that you got to this point where suddenly there was a change in mindset. And that same technology was supposed to keep deposits sticky allowed them to flow out the door at a completely unexpected, unimagined unprecedented rate.”
2023-04-10 · Forward Guidance · Lou Crandall & Joseph Wang: A Monetary Plumbing Masterclass · IDENTIFIED FROM THE TRANSCRIPT
“The existence of the RRP facility and the relatively high rate paid on it had nothing to do with the reason why the money left. That may be where some of the money ended up. But people left Silicon Valley not because of a marginal difference in interest rates between their deposits there and deposits elsewhere and investment alternatives elsewhere. They left there because they simply lost confidence in the institution. And one of the great ironies in all of this is the coming into this cycle, the banking industry as a whole was planning on what is known as a low beta strategy, that they thought that their deposit betas, the percentage of Fed rate hikes they would have to pass through would be very, very low in this cycle. And one of the reasons they believed that is that they thought there would be an enormous lock-in effect from bank apps, that they thought technology would make deposits.”
2023-04-10 · Forward Guidance · Lou Crandall & Joseph Wang: A Monetary Plumbing Masterclass · IDENTIFIED FROM THE TRANSCRIPT
“Exactly Well, it's not quantitative tightening. We've had two kinds of deposit outflows over the past year. We had those driven by interest rate movements up until mid-March. And then what happened in mid-March was, of course, entirely different. You had some substantial... Deposit outflows driven by just market fears. A key point is that in both of those scenarios,”
2023-04-10 · Forward Guidance · Lou Crandall & Joseph Wang: A Monetary Plumbing Masterclass · IDENTIFIED FROM THE TRANSCRIPT
“I learned this, you'll pretty much all from you and from your excellent book Central Banking 101. And so Lou, you are saying that Reason that bank deposits have been steadily declining over the past year, and they declined at Silicon Valley Bank every single quarter in 2022, and then they fell off a cliff those few days before it had to be taken over by the FDIC. It happened really, really quick. You're saying that the cause of that is not quantitative tightening, which in the reverse way of QT of quantitative easing, quantitative tightening, you would think we're removing reserves from the system deposits would go down. You say the primary reason why deposits are flowing out is not quantitative tightening, but interest rate policy, right?”
2023-04-10 · Forward Guidance · Lou Crandall & Joseph Wang: A Monetary Plumbing Masterclass · IDENTIFIED FROM THE TRANSCRIPT
“There's bank deposits, which are the assets of regular people and businesses, the liabilities of banks. When there's a bank run, people pull those deposits and that's when banks go under. Those deposits swelled in 2020 and a little bit 2021 because of quantitative easing, because of zero rates when there's zero rates, why go out and do a bond funder, a money market fund, you're going to get zero close to zero. So just keep your money at JPMorgan Chase, right? And then there's quantitative easing where quantitative easing increases the amount of reserves in the system for banks, not directly deposits, but then they buy a treasury from JPMorgan, the Fed buys the treasury from JP Morgan. JPMorgan replenishes it by buying it from the open market and then pays for that with bank deposits, which are an asset. So it's a sort of Swiss collateral.”
2023-04-10 · Forward Guidance · Lou Crandall & Joseph Wang: A Monetary Plumbing Masterclass · IDENTIFIED FROM THE TRANSCRIPT
“You know, the Silicon Valley blow up makes you wonder how much room small banks do have to adjust pricing on the liability side.”
2023-04-10 · Forward Guidance · Lou Crandall & Joseph Wang: A Monetary Plumbing Masterclass · IDENTIFIED FROM THE TRANSCRIPT
“money has naturally flowed out. Banks have been willing to see the deposit. They've basically been sitting on the sidelines waving goodbye because they would much rather maintain the wide interest margins that you're describing. However, we're now at a point where small banks are getting down to cash levels, cash asset levels that are probably close to the lowest levels they're comfortable with. They're going to have to start raising deposit rates or competing more aggressively in wholesale money markets to replace the funding that's continuing to leave. We don't know exactly how that process will play out. Up until now, I've simply been thinking that it was a market adjustment issue. That the issue would resolve itself in time.”
2023-04-10 · Forward Guidance · Lou Crandall & Joseph Wang: A Monetary Plumbing Masterclass · IDENTIFIED FROM THE TRANSCRIPT
“The problem is we're getting to the end of the process of easy bank adjustments. One of the issues that's being discussed right now, and one of the reasons the RRP facility has been seen as as an issue is How to put this. Bank deposits have been running off very aggressively for the past year. That has coincided with some shrinkage of the Fed's balance sheet. But as with almost everything in money market terms, it's very hard to separate out the cause and effect because everything moves at the same time. I think that the deposit runoff has been purely a function of the Fed's interest rate policy as market alternatives have become more attractive relative to bank deposits.”
2023-04-10 · Forward Guidance · Lou Crandall & Joseph Wang: A Monetary Plumbing Masterclass · IDENTIFIED FROM THE TRANSCRIPT
“One of the things, and Louis, of course, you've known this before, is that the balance sheet, the Fed balance sheet is so much larger, liquidity is so much more plentiful, it seems like the supply of deposits is probably much larger than the past. So if you have abundant supply of something, maybe you don't really need to raise interest rates as much. That's certainly been the evidence over the past year, whereas the Fed raised rates still most, let's say, four and a half percent. If you look at the balance sheet of, say, Bank of America, they still have a wide swath of deposits that pay basically zero. Maybe even if the Fed continues to aggressively hike rates, deposit rates, we're going to have to rise to the same extent that they did back then simply because we have so many more deposits.”
2023-04-10 · Forward Guidance · Lou Crandall & Joseph Wang: A Monetary Plumbing Masterclass · IDENTIFIED FROM THE TRANSCRIPT
“It turned out to be more pertinent in question than we thought. And the Fed obviously has extensive balance sheet and performance data on each individual institution and the supervision teams are looking through that very carefully. The fact that they continue to be optimistic about they knew that was an issue when they decided to raise interest rates, another quarter point last month. So as to there are obviously some bank analysts who think that there are that this is not just that this vulnerability is not just confined to a handful of banks. At this point, I don't know.”
2023-04-10 · Forward Guidance · Lou Crandall & Joseph Wang: A Monetary Plumbing Masterclass · IDENTIFIED FROM THE TRANSCRIPT
“One of the big innovations in bank regulation, banks supervision over the last decade has been the introduction of stress tests. And it's rather startling to discover that a repeat of the SNL crisis was not one of the stress scenarios that they ever looked at because that clearly, given the policy trajectory of the past year or two, the Fed knew this was a possibility. Again, the stress tests are so complex that I've never looked into the details specifically because that's more of a supervision issue and less of a money market issue.”
2023-04-10 · Forward Guidance · Lou Crandall & Joseph Wang: A Monetary Plumbing Masterclass · IDENTIFIED FROM THE TRANSCRIPT
“And it's a great question, Joseph. I just want to say SNL crisis refers to savings and loans, which had a lot of issues in the 80s and 90s when vocal jacked up interest rates up to 1980, 1981. Sorry, Lou.”
2023-04-10 · Forward Guidance · Lou Crandall & Joseph Wang: A Monetary Plumbing Masterclass · IDENTIFIED FROM THE TRANSCRIPT
“Pleasure to be here. Hey guys, if you don't know Lou, you really should know. So when I was at the Fed, everyone had a subscription to Lou. Everyone read him. He's one of the world's most foremost experts on money markets. So this is going to be a great conversation.”
2023-04-10 · Forward Guidance · Lou Crandall & Joseph Wang: A Monetary Plumbing Masterclass · IDENTIFIED FROM THE TRANSCRIPT