Monday, July 28, 2014

Fed to Maintain Record Balance Sheet for Years

Fed Prepares to Maintain Record Balance Sheet for Years - Bloomberg: " . . . Lou Crandall, chief economist at Wrightson ICAP LLC, who has been watching money markets and Fed policy for three decades, compared the importance of the shift in strategy with the Fed’s decision to establish a monopoly on bank-note issuance after its founding in 1913. One reason the Fed may stick with the strategy for a long time: It would provide safe assets that banks need to fulfill stricter requirements for capital and liquidity imposed by regulators since the financial crisis... A large balance sheet with U.S. Treasury and mortgage-backed securities has other benefits for the Fed.It provides “continuing options for impacting long-term interest rates,” Eric Rosengren, president of the Boston Fed, said at a conference this week in Guatemala City. Meyer said the FOMC now doesn’t appear worried about having a big balance sheet, and many officials “prefer to operate at a higher level of reserves.” “There is a preference emerging to say, ‘This works,’” Meyer said. “The question is, do they ever want to get back to normal?”..."

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