Fed should focus on mortgage buys, sell Treasuries: study

An eagle tops the U.S. Federal Reserve building's facade in Washington, July 31, 2013.

Credit: Reuters/Jonathan Ernst

By Pedro Nicolaci da Costa

JACKSON HOLE, Wyoming | Fri Aug 23, 2013 3:00pm EDT

JACKSON HOLE, Wyoming (Reuters) - The Federal Reserve should concentrate its unconventional monetary stimulus on mortgage asset purchases, according to a new study released on Friday, ditching Treasury bond buys which the authors say have not had much of an effect.

Presented at the Kansas City Fed's annual Jackson Hole conference, the paper argues rather controversially that the central bank should begin its exit strategy by selling Treasuries, something that is hard to conceive given the recent speedy selloff in government bonds.

The absence of concrete guidance as to the goal of asset purchases, which has been vaguely defined as aimed toward substantial improvement in the outlook for the labor market, neutralizes their impact and complicates an eventual exit, according to the paper's authors, Arvind Krishnamurthy of Northwestern University and Annette Vissing-Jorgensen of University of California, Berkeley.

"Without such a framework, investors do not know the conditions under which (asset buys) will occur or be unwound, which undercuts the efficacy of policy targeted at long-term asset values," the authors write.

Minutes from the Fed's July meeting, released on Wednesday, suggested policymakers had already considered such a step but, for now, decided against it.

"The Committee also considered whether to add more information concerning the contingent outlook for asset purchases to the policy statement, but judged that doing so might prompt an unwarranted shift in market expectations regarding asset purchases," the minutes said.

The authors of the study say the effects of the U.S. central bank's asset purchases, which began after the Fed had already brought official interest rates down in late 2008, are much narrower than policymakers' had foreseen.

Predictably, current and former Fed officials took issue with the findings. James Bullard, president of the St. Louis Fed, said the authors' focus on market impact immediately following policy announcements was misleading.

"I just wanted to push back against this conclusion that you get an effect in one single market and then there's not that much (impact) over a variety of assets," Bullard said.

Donald Kohn, former Fed Vice Chair, was also skeptical.

"The findings do not comport very well with the experience of the last couple of months," said Kohn.

Another former Fed vice chair, Alan Blinder, was even more blunt regarding the idea that Treasury sales would not have a major market impact: "You don't want to retract that given what happened recently?

U.S. Treasury 10-year note yields have risen sharply in the last two months to two-year highs above 2.80 percent following hints from the central bank that it may begin winding down its asset-buying stimulus program, also known as quantitative easing.

NARROW IMPACT

In particular, Fed Chairman Ben Bernanke and others have argued that asset purchases work by taking safe assets out of the market and therefore forcing cautious investors to take more risk. In official parlance, this is known as the "portfolio balance effect," affecting rates in markets well beyond those targeted by the Fed.

The impact of asset buying is a lot narrower than Fed officials contend, according to the authors of the paper.

"It does not, as the Fed proposes, work through broad channels such as affecting the term premium on all long-term bonds," the paper finds.

Instead, mortgage-buying has been more effective because, by targeting a specific sector that was under duress, Fed officials have been able to create scarcity of supply in the mortgage market, leading prices - and therefore credit availability - to rise.

"We find that (mortgage purchases) are more economically beneficial than Treasury (buying)," the authors write.

Recently, Fed officials have worried excess risk-taking may have gone a step too far, potentially leading to dangerous asset bubbles - hence all the talk of a ‘tapering' in quantitative easing.

In response to the worst recession in generations, the Fed has left official rates effectively at zero for over four years, and is on track to buy over $3 trillion in assets in an effort to support still-weak growth.

The U.S. economy expanded at an annualized 1.7 percent rate in the second quarter, while the jobless rate remains at an elevated 7.4 percent.

(Editing by Chris Reese and Tim Dobbyn)

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Fed should focus on mortgage buys, sell Treasuries: study

An eagle tops the U.S. Federal Reserve building's facade in Washington, July 31, 2013.

Credit: Reuters/Jonathan Ernst

By Pedro Nicolaci da Costa

JACKSON HOLE, Wyoming | Fri Aug 23, 2013 3:00pm EDT

JACKSON HOLE, Wyoming (Reuters) - The Federal Reserve should concentrate its unconventional monetary stimulus on mortgage asset purchases, according to a new study released on Friday, ditching Treasury bond buys which the authors say have not had much of an effect.

Presented at the Kansas City Fed's annual Jackson Hole conference, the paper argues rather controversially that the central bank should begin its exit strategy by selling Treasuries, something that is hard to conceive given the recent speedy selloff in government bonds.

The absence of concrete guidance as to the goal of asset purchases, which has been vaguely defined as aimed toward substantial improvement in the outlook for the labor market, neutralizes their impact and complicates an eventual exit, according to the paper's authors, Arvind Krishnamurthy of Northwestern University and Annette Vissing-Jorgensen of University of California, Berkeley.

"Without such a framework, investors do not know the conditions under which (asset buys) will occur or be unwound, which undercuts the efficacy of policy targeted at long-term asset values," the authors write.

Minutes from the Fed's July meeting, released on Wednesday, suggested policymakers had already considered such a step but, for now, decided against it.

"The Committee also considered whether to add more information concerning the contingent outlook for asset purchases to the policy statement, but judged that doing so might prompt an unwarranted shift in market expectations regarding asset purchases," the minutes said.

The authors of the study say the effects of the U.S. central bank's asset purchases, which began after the Fed had already brought official interest rates down in late 2008, are much narrower than policymakers' had foreseen.

Predictably, current and former Fed officials took issue with the findings. James Bullard, president of the St. Louis Fed, said the authors' focus on market impact immediately following policy announcements was misleading.

"I just wanted to push back against this conclusion that you get an effect in one single market and then there's not that much (impact) over a variety of assets," Bullard said.

Donald Kohn, former Fed Vice Chair, was also skeptical.

"The findings do not comport very well with the experience of the last couple of months," said Kohn.

Another former Fed vice chair, Alan Blinder, was even more blunt regarding the idea that Treasury sales would not have a major market impact: "You don't want to retract that given what happened recently?

U.S. Treasury 10-year note yields have risen sharply in the last two months to two-year highs above 2.80 percent following hints from the central bank that it may begin winding down its asset-buying stimulus program, also known as quantitative easing.

NARROW IMPACT

In particular, Fed Chairman Ben Bernanke and others have argued that asset purchases work by taking safe assets out of the market and therefore forcing cautious investors to take more risk. In official parlance, this is known as the "portfolio balance effect," affecting rates in markets well beyond those targeted by the Fed.

The impact of asset buying is a lot narrower than Fed officials contend, according to the authors of the paper.

"It does not, as the Fed proposes, work through broad channels such as affecting the term premium on all long-term bonds," the paper finds.

Instead, mortgage-buying has been more effective because, by targeting a specific sector that was under duress, Fed officials have been able to create scarcity of supply in the mortgage market, leading prices - and therefore credit availability - to rise.

"We find that (mortgage purchases) are more economically beneficial than Treasury (buying)," the authors write.

Recently, Fed officials have worried excess risk-taking may have gone a step too far, potentially leading to dangerous asset bubbles - hence all the talk of a ‘tapering' in quantitative easing.

In response to the worst recession in generations, the Fed has left official rates effectively at zero for over four years, and is on track to buy over $3 trillion in assets in an effort to support still-weak growth.

The U.S. economy expanded at an annualized 1.7 percent rate in the second quarter, while the jobless rate remains at an elevated 7.4 percent.

(Editing by Chris Reese and Tim Dobbyn)

View the original article here

This post was made using the Auto Blogging Software from WebMagnates.org This line will not appear when posts are made after activating the software to full version.

Fed should focus on mortgage buys, sell Treasuries: study

An eagle tops the U.S. Federal Reserve building's facade in Washington, July 31, 2013.

Credit: Reuters/Jonathan Ernst

By Pedro Nicolaci da Costa

JACKSON HOLE, Wyoming | Fri Aug 23, 2013 3:00pm EDT

JACKSON HOLE, Wyoming (Reuters) - The Federal Reserve should concentrate its unconventional monetary stimulus on mortgage asset purchases, according to a new study released on Friday, ditching Treasury bond buys which the authors say have not had much of an effect.

Presented at the Kansas City Fed's annual Jackson Hole conference, the paper argues rather controversially that the central bank should begin its exit strategy by selling Treasuries, something that is hard to conceive given the recent speedy selloff in government bonds.

The absence of concrete guidance as to the goal of asset purchases, which has been vaguely defined as aimed toward substantial improvement in the outlook for the labor market, neutralizes their impact and complicates an eventual exit, according to the paper's authors, Arvind Krishnamurthy of Northwestern University and Annette Vissing-Jorgensen of University of California, Berkeley.

"Without such a framework, investors do not know the conditions under which (asset buys) will occur or be unwound, which undercuts the efficacy of policy targeted at long-term asset values," the authors write.

Minutes from the Fed's July meeting, released on Wednesday, suggested policymakers had already considered such a step but, for now, decided against it.

"The Committee also considered whether to add more information concerning the contingent outlook for asset purchases to the policy statement, but judged that doing so might prompt an unwarranted shift in market expectations regarding asset purchases," the minutes said.

The authors of the study say the effects of the U.S. central bank's asset purchases, which began after the Fed had already brought official interest rates down in late 2008, are much narrower than policymakers' had foreseen.

Predictably, current and former Fed officials took issue with the findings. James Bullard, president of the St. Louis Fed, said the authors' focus on market impact immediately following policy announcements was misleading.

"I just wanted to push back against this conclusion that you get an effect in one single market and then there's not that much (impact) over a variety of assets," Bullard said.

Donald Kohn, former Fed Vice Chair, was also skeptical.

"The findings do not comport very well with the experience of the last couple of months," said Kohn.

Another former Fed vice chair, Alan Blinder, was even more blunt regarding the idea that Treasury sales would not have a major market impact: "You don't want to retract that given what happened recently?

U.S. Treasury 10-year note yields have risen sharply in the last two months to two-year highs above 2.80 percent following hints from the central bank that it may begin winding down its asset-buying stimulus program, also known as quantitative easing.

NARROW IMPACT

In particular, Fed Chairman Ben Bernanke and others have argued that asset purchases work by taking safe assets out of the market and therefore forcing cautious investors to take more risk. In official parlance, this is known as the "portfolio balance effect," affecting rates in markets well beyond those targeted by the Fed.

The impact of asset buying is a lot narrower than Fed officials contend, according to the authors of the paper.

"It does not, as the Fed proposes, work through broad channels such as affecting the term premium on all long-term bonds," the paper finds.

Instead, mortgage-buying has been more effective because, by targeting a specific sector that was under duress, Fed officials have been able to create scarcity of supply in the mortgage market, leading prices - and therefore credit availability - to rise.

"We find that (mortgage purchases) are more economically beneficial than Treasury (buying)," the authors write.

Recently, Fed officials have worried excess risk-taking may have gone a step too far, potentially leading to dangerous asset bubbles - hence all the talk of a ‘tapering' in quantitative easing.

In response to the worst recession in generations, the Fed has left official rates effectively at zero for over four years, and is on track to buy over $3 trillion in assets in an effort to support still-weak growth.

The U.S. economy expanded at an annualized 1.7 percent rate in the second quarter, while the jobless rate remains at an elevated 7.4 percent.

(Editing by Chris Reese and Tim Dobbyn)

View the original article here

This post was made using the Auto Blogging Software from WebMagnates.org This line will not appear when posts are made after activating the software to full version.

Fed should focus on mortgage buys, sell Treasuries: study

JACKSON HOLE, Wyoming | Fri Aug 23, 2013 11:02am EDT

JACKSON HOLE, Wyoming (Reuters) - The Federal Reserve should concentrate its unconventional monetary stimulus on mortgage asset purchases, according to a new study released on Friday, ditching Treasury bond buys which the authors say have not had much of an effect.

Presented at the Kansas City Fed's annual Jackson Hole conference, the paper argues rather controversially that the central bank should begin its exit strategy by selling Treasuries, something that is hard to conceive given the recent speedy selloff in government bonds.

The absence of concrete guidance as to the goal of asset purchases, which has been vaguely defined as aimed toward substantial improvement in the outlook for the labor market, neutralizes their impact and complicates an eventual exit, according to the paper's authors, Arvind Krishnamurthy of Northwestern and Annette Vissing-Jorgensen of Berkeley.

"Without such a framework, investors do not know the conditions under which (asset buys) will occur or be unwound, which undercuts the efficacy of policy targeted at long-term asset values," the authors write.

Minutes from the Fed's July meeting, released on Wednesday, suggested policymakers had already considered such a step but, for now, decided against it.

"The Committee also considered whether to add more information concerning the contingent outlook for asset purchases to the policy statement, but judged that doing so might prompt an unwarranted shift in market expectations regarding asset purchases," the minutes said.

The effects of the U.S. central bank's asset purchases, which began after the Fed had already brought official interest rates down in late 2008, are much narrower than policymakers' had foreseen, they say.

In particular, Fed Chairman Ben Bernanke and others have argued that asset purchases work by taking safe assets out of the market and therefore forcing cautious investors to take more risk. In official parlance, this is known as the "portfolio balance effect," affecting rates in markets well beyond those targeted by the Fed.

The impact of asset buying is a lot narrower than Fed officials contend, according to the authors of the paper.

"It does not, as the Fed proposes, work through broad channels such as affecting the term premium on all long-term bonds," the paper finds.

Instead, mortgage-buying has been more effective because, by targeting a specific sector that was under duress, Fed officials have been able to create scarcity of supply in the mortgage market, leading prices - and therefore credit availability - to rise.

"We find that (mortgage purchases) are more economically beneficial than Treasury (buying)," the authors write.

Recently, Fed officials have worried excess risk-taking may have gone a step too far, potentially leading to dangerous asset bubbles - hence all the talk of a ‘tapering' in quantitative easing.

In response to the worst recession in generations, the Fed has left official rates effectively at zero for over four years, and is on track to buy over $3 trillion in assets in an effort to support still-weak growth.

The U.S. economy expanded at an annualized 1.7 percent rate in the second quarter, while the jobless rate remains at an elevated 7.4 percent.

(Reporting By Pedro Nicolaci da Costa; Editing by Chris Reese)

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Kitchen bullies should be jailed, says Raymond Blanc

By Tim Oglethorpe

PUBLISHED: 00:36 GMT, 26 July 2013 | UPDATED: 13:33 GMT, 26 July 2013

Fighting talk: Raymond Blanc has attacked colleagues who bully in the kitchen and says he wants to stop the trauma some young chefs feel when they enter the kitchen

Raymond Blanc is preparing lunch in his two Michelin star Oxfordshire restaurant and hotel, Le Manoir aux Quat’Saisons.

A member of staff has failed to understand his instructions, but there’s no pan-throwing or swearing by Raymond, 63. The presenter of TV shows The Very Hungry Frenchman and Food & Drink smiles gently and patiently explains what he wants doing.

‘People who bully in the kitchen should be in jail,’ he says. ‘How would you feel if your son or daughter were being pushed around while working in a restaurant?

‘I’ve had trainee chefs who couldn’t cook or even touch ingredients because they were so traumatised by what they had endured before they came to me.

‘Tell me, why are there are many high- profile chefs on TV and yet we have a shortage of young chefs? Do you blame this culture of bullying for putting young people off entering the profession?

‘What angers me most is that it is so unnecessary. A kitchen doesn’t have to be noisy with people shouting and pushing other people around. A good kitchen is a quiet kitchen and a quiet kitchen can still be a passionate kitchen.

‘If there’s a problem, the angry person can go outside, calm down and we can talk about it later. Bawling at someone doesn’t help.

‘I had a guy in my kitchen who used to get very angry, so I sent him on a special training course and now he is the best manager of a kitchen I know.

‘Shouting at some guy in front of five million people on TV is cheap entertainment.’

Raymond is doing his bit to solve the problem. Using his calm, quiet kitchen at Le Manoir, he prepares basic, tasty but healthy dishes in his new BBC2 series How To Cook Well.

‘I just want people to fall in love with cooking food again, to experience the passion I have for it,’ he says.

Passion: Raymond wants to try and get people to fall in love with cooking again in his new show and also hopes to inspire a new generation of cooks

‘And while it may sound corny, I do still have that passion for food. I have taken off only two days in the past six months and they were spent shooting and fishing, and not actually catching salmon in Scotland. But it’s my nature to take on too much.’

Raymond’s passion is plain to see. The man who suffered two mini strokes aged 42, caused by stress and overwork, talks 19 to the dozen.

He gets so wrapped up discussing food and preparing dishes at the same time that he develops a migraine.

Revived by a small rest, he’s back on the case again, only to be stopped in his tracks once more, this time by a crumb of food that threatens to choke him when he is once more talking non-stop.

Raymond may be a workaholic, but he still knows how to have fun. He appeared on the comedy show Miranda and he has self-deprecation down to a fine art.

Time-keeping? ‘Not good. I spend my whole life being late.’

Technical skills? ‘Very limited,’ he says, as he loses a fight with a food blender. ‘I can just about switch a gadget on and off.’

Life skills? ‘I concentrate on detail and lose sight of the bigger picture. I am a micro idiot.’

Talent as a cook? Those two Michelin stars say it all, but there has been the occasional disaster along the way, to which he is only too happy to confess.

Michelin stars: Raymond Blanc's Le Manoir aux Quat'Saisons hotel and restaurant in Oxfordshire

He was sacked as a waiter from the Michelin-starred Le Palais de la Biere in his home city of Besancon, after getting under the skin of the head chef.

‘I would tell him how to improve his dishes by reducing the amount of salt and to add lemon juice when it was needed,’ he says.

‘He hit me and knocked me out. I lost my teeth and my job and was exiled to England.’

And then there was the incident at the Dorchester Hotel?.?.?.

‘Years ago, when I was the new kid in town, the supposedly brilliant young cook who had just arrived in London, I was invited by Egon Ronay to cook at the Dorchester for 50 people, including Anton Mosimann and Michel Roux — all the top guys.

‘I didn’t prepare properly and when I came to serve the puff pastry it was leaking and the turbot was raw. It was an unqualified disaster.

‘The worst thing was the polite applause I received from the diners, this damning by faint praise. I learned lessons that day I have never forgotten.’

Workaholic: Raymond suffered two mini strokes aged 42 because of stress and overwork and has been known to develop a migraine when thinking about dishes

Raymond passed on his passion for food and his approach to life to his sons, Sebastien, 36, and Olivier, 32. They were given the opportunity to follow him into his kitchen and become chefs. Both declined.

‘I gave them the best education money could buy so they could choose what they wanted to do with their lives.

‘Sebastien took a law degree, but hated it, so I sent him to the best hotels in the world so he could be a hotelier. When he came through with flying colours, I was the happiest papa in the world.

‘Then he told me he wanted to be an actor — I hit the roof! But he said something that changed it all: “I have found what I want do with my life, I have a passion for it.” And then I understood.

‘Olivier is also an actor and illustrates books. He has created a website and app called Henri Le Worm, in which I am the hero. It’s about introducing children to the idea of better food.

‘The last thing I would have wanted for either of them would have been to do a job they hated, especially in a tough industry such as restaurants, where people can bully those they are supposed to be helping.

‘I sincerely hope that culture is changing, for all the young people who will otherwise suffer and be put off cooking for life.’

How To Cook Well, BBC2, Sunday, 11.45am, and  Monday, 8.30pm.
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Fed's Bernanke should testify in AIG bailout lawsuit: judge

(Reuters) - Federal Reserve Chairman Ben Bernanke should testify in the lawsuit by American International Group Inc's former chief Maurice "Hank" Greenberg against the United States over the insurer's 2008 bailout, a judge ruled on Monday.

Judge Thomas Wheeler of the U.S. Court of Federal Claims rejected the government's effort to keep Bernanke from being deposed, saying the Fed chairman was a "central figure" in the decision to bail out AIG.

"Indeed, the court cannot fathom having to decide this multi-billion dollar claim without the testimony of such a key government decision maker," Wheeler wrote. "These facts constitute 'extraordinary circumstances' for the taking of Mr. Bernanke's deposition."

Greenberg's Starr International Co, which once had a 12 percent stake in AIG, is suing over the government's taking of a 79.9 percent stake in the insurer in September 2008 and a separate 1-for-20 reverse stock split in June 2009.

(Reporting by Jonathan Stempel in New York; Editing by Gerald E. McCormick)

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