Sheila Bair
@SheilaBair2013
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Speaker, writer. Former College President, FDIC Chair. Author NYT best seller Bull by the Horns and Money Tales series. Committed to young people. Personal acct
Washington, DC
Joined July 2013
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Dow up. Oil up. Bitcoin up. Everything’s up except the most important thing in our economy: working people’s wages.
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Timely release of the excellent Frontline documentary, Age of Easy Money. It breaks down the damage of 14 years of low interest rates, including the impact on financial stability we are seeing now. Please watch.
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I was an NRA member as a kid. Hunted quail with my dad. Proud of my NRA marksmanship medals. Back then, the NRA stood for gun safety and sportsmanship. Not anymore. Their true constituency: those who profit from selling guns.
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Kind of surprising that with all of the anger and recriminations being hurled at Robinhood, hedge funds, short sellers, retail traders, SEC, etc., not much ire at a central culprit-our antiquated payments infrastructure and the fact that it still take 2 days to settle a trade.
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I’m all for robust antitrust enforcement. Markets don’t work without competition. Yet, overlooked is the role of low interest rates in driving market concentration.
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This idea that we can enjoy virtually unlimited spending when interest rates are so low ignores the risk that all that debt may need to be refinanced at a higher rate down the road.
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Student debt has prevented 400,000 young Americans from buying homes, the Fed says in a paper covering 2005 to 2014 via
@WSJ
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Not-so-gentle reminder for those criticizing the $1400 household payments because some of the money might be saved not spent, here is what has been going on with wealth inequality in the US. Families need to build financial security.
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Not good. Consumer credit exploding to over $5T in Nov, while revolving credit (mostly cards) near $1.3T. We obsess over GDP, unemployment, labor participation, etc as predictors of recession, but rising consumer debt levels have also portended economic downturns. Hope this is a…
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Fed’s right on negative rates. Post-GFC experience shows that low interest rates don’t trickle down. They inflate financial assets primarily owned by the rich. Neg. rates double down on a failed policy. The idea is to increase borrowing, but the last thing we need is more debt.
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Mr. Trump has busted the budget throughout his tenure, and Mr. Biden wants to spend $5.4T more. With US per capita health/education/defense costs far in excess of other developed countries (and worse results) can someone please talk about how we are spending (not how much)?
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Once we get past this painful transition of tightening, we may find higher rates are better for growth by creating more discipline in capital allocation. via
@WSJ
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I get why Democrats want latitude to continue Fed support for the muni market and small/medium business lending. But corporate debt? Seriously? With 2.2 T already issued this year- smashing previous records- why in the world does the Fed need to keep backstopping that market?
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Bob Dole was one of the best dressed senators. It was not easy. Special padding in his suit coats to fill out the much-damaged part of his upper body from WWII injuries. Only one good hand to button buttons. If he could make the effort, why not John Fetterman?
#SenateDressCode
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The Fed could have provided targeted support for primary corporate debt issuance, conditioned on no shareholder distributions. Instead, it provided massive, blanket support for corporate debt markets, no strings. This is the result. via
@financialtimes
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Buttigieg strikes me as sincere and committed, but grossly inexperienced and easily flattered by the powers that be, who fear Warren more than any other candidate. He criticizes her for being a “fighter” but does he think he will change DC by giving a good speech?
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I think Wall Street’s unseemly eagerness for a rate cut (defying Chair Powell’s statements that it’s premature) shows you who really benefits from low rates. Unless the economy deteriorates, keep ‘em high.
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As with the related “side effects” of yawning wealth and income inequality, sustained low interest rates help the big get bigger, stifling innovation and productivity, while inflating the value of financial assets overwhelming owned by the rich.
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Read two articles in WSJ. One about the shortage of credit to small businesses. The other about big banks eager to distribute “excess” capital to shareholders. Sorry. Having a hard time reconciling how banks can have “excess” capital but still find it necessary to curtail credit.
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Perspective | The Fed is addicted to propping up the markets, even without a need
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A weeping cherry we planted a few years ago in memory of my mother, Clara. We mixed the soil with her ashes and a splash of her favorite scotch which I think would have amused her. It is always the first to bloom in our yard. I love this time of year.
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Ironically, I think the general public “gets it”. But our political leadership seems unwilling to fundamentally rethink the role of monetary policy in our economy.
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With all the smart people at the Fed, why did it need to hire outside help to buy securities, and even if it did, why not hire an independent advisor with no asset management business? May well be on the up and up, but optics are terrible.
via
@WSJ
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Nice story about someone named Sheila Blair becoming the new chair of Fannie Mae. Fannie Mae Names New Chair Of Its Board Of Directors
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People, stop piling on the SEC for the hack of its X account. Seems the focus should be on X’s own security. (My account has been compromised twice.) Let’s also find out who was trading bitcoin and profited by the false post.
@sonalibasak
@BetterMarkets
@SECGov
@DianeSwonk
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Yet, no one in either party talks about this. If there is bipartisan consensus on anything, it is to rely more, not less, on cheap debt to fuel economic growth.
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Talk about premature! Wall St bulls running wild with dovish dot plot. This will make it all the harder to sustain progress on inflation, which even the Fed says won’t hit target until 2026. FOMC is blinking already on recession risks…
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Dear author. We need to talk. Please review the last several decades and you will see stronger economic growth occurring when interest rates were higher than they are today. The ZIRP era brought us useless innovations like Bored Ape NFTs. But it also led to world-changing…
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The Fed has raised short term rates by 6000% this year. In our over-leveraged economy, they need to stop and assess the impact. Opinion: Why the Fed, and Jerome Powell, should hit the pause button on rate hikes via
@YahooFinance
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Congratulations to Janet Yellen. After breaking the glass ceiling at the Fed, she will now become the first woman to lead the US Treasury Department. Outstanding, unifying choice by the President-elect.
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Thank you Edward Luce for saying what so many know to be true but are afraid to say.
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This is the person I know. Elizabeth Warren believes in a market economy. She just wants it to work for everyone, writes
@SheilaBair2013
via
@WSJ
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Scratching my head over the debate about whether inflation was caused by supply constraints (team transitory) or excess demand. Inflation is a result of imbalances between the two. Pouring massive monetary stimulus into a supply constrained economy was going to inevitably lead to…
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Finally, I do have to note the irony that big banks who have pulled back from Main Street lending during the pandemic in favor of the wealthy (apparently thinking the hoi poloi are too risky) are now taking their losses in catering to this rich family office.
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Most recent FOMC minutes indicate Fed’s earnings will soon go negative. No surprise. Estimated annual cost of paying interest on reserves/reverse repo will hit $200B at year end, assuming target rate of 3.25 to 3.5. It’s expensive to pay institutions not to lend.
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Pleased to be celebrating my birthday with my sister in Illinois who tactfully placed one musical candle on the cake.
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I’m generally conservative on the fiscal side, but in this case, I say $2000+ for low-and middle-income families would be money well spent. Op-ed: Increase the pandemic stimulus payments
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“To actually end our bailout culture, we have to not only accept the inevitability of bank failures and implement strong capital requirements and an effective resolution framework, we also must summon our own conviction and courage to push forward and actually privatize the…
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OK. I’ll go out on a limb here. I think Wells Fargo should be given latitude to make CARES Act small business loans even if that expands its balance sheet beyond current regulatory limits.
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Inflation ticks higher but Mr. Biden wants rate cuts and a $7.3T federal budget. He’s polling badly even with a strong economy because prices are still so much higher than when he took office. He will make it worse (help Trump) with more inflationary policies. Consumer Price…
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Exclusive: Fed is ‘throwing money in the wrong place,’ says Sheila Bair, former top banking regulator
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#SBF
was financial illiterate. He thought effective altruism meant he could rip people off, that it was OK to use new investor money to pay the old… Another reason why we need early financial education - to help kids understand money ethics, hopefully preventing future SBF’s.
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Reposting this piece from December. The Fed should hit pause on rate hikes to assess their full impact on the economy and financial system system stability. via
@YahooNews
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As I’ve said before, the reason we don’t have inflation is because we’ve relied on monetary policy to support our economy. The money is going into financial markets, not labor markets, creating the huge chasm we see between working families and Wall Street.
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Disappointed that the Fed’s two year review of monetary policy led to this “fundamental” change: moving from a standing 2% inflation target to an average 2% inflation target.
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So the Fed still hasn’t directed banks to suspend shareholder payouts and bonuses, but it keeps giving them capital relief. Big banks get the Fed's blessing to take on more leverage via
@markets
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Our daughter Colleen graduated on Saturday from Oregon State. Here with my husband Scott and our son Preston. So proud, honey. You made it!!
@PrestonCooper93
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Mr. Biden should also consider gradual elimination of corporate interest deductibility. Fed interventions/super low rates have caused companies to lever up as never before.
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Hopefully Powell will address this tomorrow. The Fed’s $8.4 T domestic holdings have fallen by just $60B since it started to let its portfolio shrink on 6/1, tho it raised expectations of 47.5B per month. Lack of focus on money supply imperils the success of its inflation fight.
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Jelena McWilliams led the FDIC with grace and dignity. She was a steady hand during the pandemic when well-justified regulatory forbearance was needed to help millions of households in economic distress. We should thank her for her public service and wish her the best.
@FDICgov
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Just googled “Crypto for Kids” and saw endless links to “financial ed” promoting crypto investments, even special tokens made for kids. Really? Let’s teach kids about speculation, leverage, asset bubbles, and volatility first. If they still want to trade crypto as
ADULTS, fine.
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Tho well-intentioned, the Fed’s new policy will just give it more reason to keep rates near zero for a very long time, pumping more cheap debt into the system, making the big bigger, the rich richer, and dragging down economic innovation and growth.
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In the 1980’s, as his Judiciary Counsel when he championed the Voting Rights Act extension, the MLK holiday, disability rights and so much more. He was always a champion for the vulnerable, standing up for the little guy.
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The reason the Fed has not been able to achieve consumer price inflation is because the money isn’t getting to consumers! Without changing the transmission mechanism, increased money supply will remain trapped in the either of financial markets.
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Having a hard time reconciling big banks’ boast that they are so well capitalized they can pay dividends and still support the economy, but they refuse to take even 5% of the risk of lending to Main Street.
@HalScott_HLS
via
@WSJ
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Very disappointed that the FDIC and OCC followed the Fed to weaken the supplementary leverage ratio, a key constraint on mega-banks use of excessive leverage. As Director Gruenberg pointed out in his dissent, this will result in a 9% or $55 B reduction in their capital minimums.
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Will Senators assuring their constituents that this bill only helps smaller banks support this amendment? Republican senator proposes stripping Senate banking bill of help for big banks
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As I’ve long argued, derivatives deal-making by regulated entities should be confined to transactions that serve a bona fide risk management function. There is no good public policy rationale for safety net institutions to arrange these highly speculative, risky products.
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The problem is not higher rates, which would help smaller lenders if we had a level playing field. The problem is that the biggest banks are viewed as too big to fail. They can pay lower rates on uninsured deposits because of that TBTF status. Top four US banks grab a growing…
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A little noticed but essential provision of the pandemic bill is $25B to cover back rent. Many working families hit by this pandemic were also hit by the Mortgage Crisis. Then, they went from homeowner to tenant. Let’s make sure they don’t now go from tenant to homeless.
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And I have to point out that the microscopic scrutiny of PPP stands in stark contrast to the Fed’s trillion dollar backstop of financial markets, in particular corporate debt. Iffy companies like Boeing and GE have been able to issue at low rates with NO STRINGS attached.
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Capital needs to cost something for a dynamic economy to work.
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With Charlie Munger’s passing, young investors have lost a role model who shunned speculation in favor of buying “wonderful companies at fair prices”. My favorite Mungerism: the GFC was caused by “megalomania, insanity, and evil.” He will be missed.
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So what? Tech would confront profit declines from Mr. Biden’s tax plans because they hardly pay any taxes now. This is an appropriate policy result.
Some big U.S. tech sectors could face double-digit percentage declines in profits from Joe Biden’s tax plan, BofA Global Research estimates
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Hundreds of billions of deposits moving to money market funds. Make no doubt, banks need to up the interest they pay. But, MMFs have an unfair advantage. TBTF status (two bailouts) access to the equivalent of high yield reserve accounts (reverse repo). Safety net benefits given…
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Here’s hoping the controversy around Mr. Trump’s taxes (or lack thereof) will prompt Washington to get serious about tax reform. Raising rates won’t address the problem. What’s needed is the hard work around closing loopholes, simplifying the code, and adequately funding the IRS.
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Kudos to Grinnell College for replacing student loans with grants, joining a small but growing number of institutions that do so. Wouldn’t it be nice if all those top schools with multi-billion dollar endowments followed suit?
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So this is the box we find ourselves in. Shift to fiscal support to help Main Street, but risk consumer price inflation, which will make it more expensive for government to fund the very programs Main Street needs.
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“From a financial stability perspective, they really killed a fly with a sledgehammer,” said Nicolas Véron, a regulation expert..” European regulators criticise US ‘incompetence’ over Silicon Valley Bank collapse
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Biden’s welcome shift to fiscal support will help address this inequity, but will also increase inflation risk. As more money reaches consumers, we will likely see increased demand and higher prices, which in turn will create pressure to raise rates.
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Truly promising innovations will attract capital. They always do. And with higher rates, they won’t have to compete with all those idiotic “innovations” that have been able to attract investment dollars because of ZIRP.
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As we saw after the GFC, aggressive use of monetary policy helps asset holders, not wage earners. That’s an observation, not a criticism of the Fed which is using the tools it has. The Bailout Is Working — for the Rich
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Boosting the attractiveness of tech investments and enriching the prospects of venture capitalists are not part of the Fed’s mandate.
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Low productivity, wealth inequality, increased corporate concentration, excessive leverage, financial instability, rampant speculation - these are all enabled by ultra low rates. Happy to send you the studies if you’d like.
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Without comment on Fed succession, I do take issue with the view that anyone who cares about financial regulation is “political”. No, they’re principled. Let’s face it. You don’t get votes or political donations arguing for tougher capital rules. via
@WSJ
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Of all the issues of inequity that divide Main Street and Wall Street, the right to pump and dump stock is not high on my list. (Tho agree trading restrictions should apply equally to all.)
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People losing their jobs en masse. So glad we found the time to bail out money market funds (again).
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I’ve had issues with Uber but today, I became a die hard Uber user. Went to Dulles for an international flight. Forgot my purse in the car. Driver found it, drove back to the airport, ran it into the check-in counter (remembered my airline) and had it delivered to my gate. Wow!
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Hell has a special place for bank lobbyists exploiting this crisis to further their deregulatory agenda. Coronavirus should not be an excuse to substantially loosen big bank rules via
@YahooFinance
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Government interventions, whether monetary or fiscal, should help our vulnerable populations. Corporate America is doing just fine. Let the Fed’s corporate debt facilities die.
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Meet the Marvelous Maisel, a new member of our family. Rescued from a “hoarder,” she suffered from rotted teeth, ear infections, and skin disease. She’s healthy now, just exhausted from playing with her Christmas chew toys. So happy we can give her a good life. Merry Christmas!
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I applaud JPM Chase’s leadership in vowing not to subject CARES act payments to debt collections, but this should not be left to the goodwill of creditors. Congress should extend debt collection protection ASAP. I’m going to optimistically assume this was just an oversight.
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Our beloved Ludwig died today. Not the smartest dog, but he made up for it with love, loyalty, and a brave heart. I will miss our walks and watching him chase deer, which he fortunately never caught. Once a malnourished rescue, he had 13 good years with us and a peaceful passing.
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Social media made $11 billion in U.S. ad sales from minors and therefore has ‘overwhelming financial incentives’ to avoid protecting children, study finds
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This sounds exactly like the letter I received from Senators in late 2006 telling me that big banks were overcapitalized...GOP senators join criticism of Fed over capital rules for megabanks
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This idea that a rate pause is a bailout for the banks is ridiculous. Further short term hikes hit the real economy while the Fed’s new lending facility could pump up to $2 trillion into the banking system, per JPM Chase estimates. Another rate hike tightens credit for us while…
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Washington College celebrates our global community and supports all of our students. We welcome all nationalities and faiths.
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In the debate over cryptocurrency/stablecoin regulation, let’s separate investor protection and system stability (important) from protecting large bank dominance over payments. The latter should not be the objective.
@Aarondklein
@GeorgeSelgin
@MorganRicks1
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At last! Fed unleashes 13(3) authority to help the real economy. And new small business loan facility in the works. Thank you Jay Powell! Federal Reserve announces extensive new measures to support the economy via
@FederalReserve
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If the Fed wants to help the real economy, then work with Congress for true “fundamental” reform where new money is given, not lent, to households in times of severe economic stress.
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Real estate inflation misallocates capital, serving as a drag on productivity. Common sense told us that already, but good to see empirical support. Excellent paper. Housing booms, reallocation and productivity via
@bis_org
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Proposed CapOne acquisition of Discover driven by profitability of the card industry which is driven by consumers overcharging, carrying balances, and paying hundreds of billions in interest and fees. Ironic that CapOne is using equity, not debt, to finance…
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US regulators are setting a dangerous precedent on SVB
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Increasing the cost of debt financing thru the tax code could help shift the pendulum back to equity for a more resilient economy.
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