Highest-paid U.S. CEOs are often fired or fined - study

By Nadia Damouni

NEW YORK | Wed Aug 28, 2013 6:51pm BST

NEW YORK (Reuters) - About 40 percent of the highest-paid CEOs in the United States over the past 20 years eventually ended up being fired, paying fraud-related fines or settlements, or accepting government bailout money, according to a study released on Wednesday.

The report by the Institute for Policy Studies, a left-leaning think tank, said that chief executives for large companies received about 354 times as much pay as the average American worker in 2012. That gap has soared since 1993, when CEOs for big companies received about 195 times as much.

But the best-paying companies do not necessarily receive the best performance from their CEOs, the report said.

For example, Enron's Kenneth Lay was one of the 25 highest-paid chief executives for four years, before his company collapsed in an accounting fraud in 2001. In May 2006, a Houston federal jury found Lay guilty of fraud and conspiracy. His death two months later led to his conviction being thrown out.

The think tank looked at the 25 best-paid CEOs for each of the last 20 years. There were 241 executives on the list in total, because many appeared for multiple years. That means that the 40 percent average includes many chief executives who have appeared on the lists several times.

To be sure, all of the biggest financial services companies during the 2008 financial crisis received bailouts, whether they wanted them or not. But many chief executives on the list, including Lehman Brothers' Dick Fuld, were at the helm when their company either went under or accepted a government rescue package. Fuld received $466.3 million (300.4 million pounds) of compensation from 2001 through 2007, the report said. Fuld was not immediately available for comment.

The 2010 Dodd-Frank Act took steps to encourage more rational pay levels. The law, for example, requires all financial companies to disclose the ratio between the CEO's pay and median annual compensation for employees. But a number of the mandates have yet to be finalized by regulators, said Sarah Anderson, who co-authored the think tank's report.

"The Dodd-Frank Act was signed three years ago, and it is time for these very modest reforms in that legislation to be rigorously implemented," Anderson told Reuters.

"We see CEO-worker pay ratio disclosure as an important step forward toward corporate compensation common sense," the report said.

(Reporting by Nadia Damouni; editing by Dan Wilchins and Matthew Lewis)

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Emerging countries must be able to control capital flows: study

By Pedro Nicolaci da Costa

JACKSON HOLE, Wyoming | Sat Aug 24, 2013 12:31pm EDT

JACKSON HOLE, Wyoming (Reuters) - Emerging market nations can be adversely affected by large swings in investment and, therefore, must develop tools to control credit flows or risk relinquishing any independent monetary policy, a study shows.

These findings were presented at the Kansas City Federal Reserve's monetary policy symposium at Jackson Hole, which highlighted the global impact of the unconventional monetary policy of the United States and other major central banks.

Many countries, including India and Brazil, have recently experienced steep sell-offs in their currencies, linked in part to the prospect that the Fed might soon dial down the pace of its bond-buying monetary stimulus.

The Jackson Hole study highlights a shift in conventional economic thinking, which used to champion an open flow of money between countries, regardless of the consequences.

"Macroprudential policies are necessary to restore monetary policy independence for the non-central countries," wrote Helene Rey, professor at the London Business School. "They can substitute for capital controls, although if they are not sufficient, capital controls must also be considered."

That, said the study, is because countries with floating exchange rates, the dominant global practice, would be abdicating their control over interest rates and credit creation from sources outside their control.

"Independent monetary policies are possible if - and only if - the capital account is managed, directly or indirectly, via macroprudential policies," Rey said. These can take many forms, including efforts to restrain credit growth in particular areas of the economy.

"Since, for a country, the most dangerous outcome of inappropriately loose global financial conditions is excessive credit growth, a sensible policy option is to monitor directly credit growth and leverage in each market," she said.

Terrence Checki, executive vice president of the Federal Reserve Bank of New York, charged with commenting on the paper, pushed back against the notion that rich-country central banks should start paying more attention to the international effects of their policies.

He said that, in keeping with conventional wisdom at the Fed, monetary policy should be aimed at domestic objectives.

"It's not clear we can control the financial cycle very well with monetary policy," Checki said.

(Editing by Vicki Allen and Gunna Dickson)

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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

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Emerging countries must be able to control capital flows: study

By Pedro Nicolaci da Costa

JACKSON HOLE, Wyoming | Sat Aug 24, 2013 12:31pm EDT

JACKSON HOLE, Wyoming (Reuters) - Emerging market nations can be adversely affected by large swings in investment and, therefore, must develop tools to control credit flows or risk relinquishing any independent monetary policy, a study shows.

These findings were presented at the Kansas City Federal Reserve's monetary policy symposium at Jackson Hole, which highlighted the global impact of the unconventional monetary policy of the United States and other major central banks.

Many countries, including India and Brazil, have recently experienced steep sell-offs in their currencies, linked in part to the prospect that the Fed might soon dial down the pace of its bond-buying monetary stimulus.

The Jackson Hole study highlights a shift in conventional economic thinking, which used to champion an open flow of money between countries, regardless of the consequences.

"Macroprudential policies are necessary to restore monetary policy independence for the non-central countries," wrote Helene Rey, professor at the London Business School. "They can substitute for capital controls, although if they are not sufficient, capital controls must also be considered."

That, said the study, is because countries with floating exchange rates, the dominant global practice, would be abdicating their control over interest rates and credit creation from sources outside their control.

"Independent monetary policies are possible if - and only if - the capital account is managed, directly or indirectly, via macroprudential policies," Rey said. These can take many forms, including efforts to restrain credit growth in particular areas of the economy.

"Since, for a country, the most dangerous outcome of inappropriately loose global financial conditions is excessive credit growth, a sensible policy option is to monitor directly credit growth and leverage in each market," she said.

Terrence Checki, executive vice president of the Federal Reserve Bank of New York, charged with commenting on the paper, pushed back against the notion that rich-country central banks should start paying more attention to the international effects of their policies.

He said that, in keeping with conventional wisdom at the Fed, monetary policy should be aimed at domestic objectives.

"It's not clear we can control the financial cycle very well with monetary policy," Checki said.

(Editing by Vicki Allen and Gunna Dickson)

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.

Emerging countries must be able to control capital flows - study

By Pedro Nicolaci da Costa

JACKSON HOLE, Wyoming | Sat Aug 24, 2013 5:29pm BST

JACKSON HOLE, Wyoming (Reuters) - Emerging market nations can be adversely affected by large swings in investment and, therefore, must develop tools to control credit flows or risk relinquishing any independent monetary policy, a study shows.

These findings were presented at the Kansas City Federal Reserve's monetary policy symposium at Jackson Hole, which highlighted the global impact of the unconventional monetary policy of the United States and other major central banks.

Many countries, including India and Brazil, have recently experienced steep sell-offs in their currencies, linked in part to the prospect that the Fed might soon dial down the pace of its bond-buying monetary stimulus.

The Jackson Hole study highlights a shift in conventional economic thinking, which used to champion an open flow of money between countries, regardless of the consequences.

"Macroprudential policies are necessary to restore monetary policy independence for the non-central countries," wrote Helene Rey, professor at the London Business School. "They can substitute for capital controls, although if they are not sufficient, capital controls must also be considered."

That, said the study, is because countries with floating exchange rates, the dominant global practice, would be abdicating their control over interest rates and credit creation from sources outside their control.

"Independent monetary policies are possible if - and only if - the capital account is managed, directly or indirectly, via macroprudential policies," Rey said. These can take many forms, including efforts to restrain credit growth in particular areas of the economy.

"Since, for a country, the most dangerous outcome of inappropriately loose global financial conditions is excessive credit growth, a sensible policy option is to monitor directly credit growth and leverage in each market," she said.

Terrence Checki, executive vice president of the Federal Reserve Bank of New York, charged with commenting on the paper, pushed back against the notion that rich-country central banks should start paying more attention to the international effects of their policies.

He said that, in keeping with conventional wisdom at the Fed, monetary policy should be aimed at domestic objectives.

"It's not clear we can control the financial cycle very well with monetary policy," Checki said.

(Editing by Vicki Allen and Gunna Dickson)

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.

Emerging countries must be able to control capital flows: study

By Pedro Nicolaci da Costa

JACKSON HOLE, Wyoming | Sat Aug 24, 2013 12:31pm EDT

JACKSON HOLE, Wyoming (Reuters) - Emerging market nations can be adversely affected by large swings in investment and, therefore, must develop tools to control credit flows or risk relinquishing any independent monetary policy, a study shows.

These findings were presented at the Kansas City Federal Reserve's monetary policy symposium at Jackson Hole, which highlighted the global impact of the unconventional monetary policy of the United States and other major central banks.

Many countries, including India and Brazil, have recently experienced steep sell-offs in their currencies, linked in part to the prospect that the Fed might soon dial down the pace of its bond-buying monetary stimulus.

The Jackson Hole study highlights a shift in conventional economic thinking, which used to champion an open flow of money between countries, regardless of the consequences.

"Macroprudential policies are necessary to restore monetary policy independence for the non-central countries," wrote Helene Rey, professor at the London Business School. "They can substitute for capital controls, although if they are not sufficient, capital controls must also be considered."

That, said the study, is because countries with floating exchange rates, the dominant global practice, would be abdicating their control over interest rates and credit creation from sources outside their control.

"Independent monetary policies are possible if - and only if - the capital account is managed, directly or indirectly, via macroprudential policies," Rey said. These can take many forms, including efforts to restrain credit growth in particular areas of the economy.

"Since, for a country, the most dangerous outcome of inappropriately loose global financial conditions is excessive credit growth, a sensible policy option is to monitor directly credit growth and leverage in each market," she said.

Terrence Checki, executive vice president of the Federal Reserve Bank of New York, charged with commenting on the paper, pushed back against the notion that rich-country central banks should start paying more attention to the international effects of their policies.

He said that, in keeping with conventional wisdom at the Fed, monetary policy should be aimed at domestic objectives.

"It's not clear we can control the financial cycle very well with monetary policy," Checki said.

(Editing by Vicki Allen and Gunna Dickson)

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.

Emerging countries must be able to control capital flows - study

JACKSON HOLE, Wyoming | Sat Aug 24, 2013 4:01pm BST

JACKSON HOLE, Wyoming (Reuters) - Emerging market nations can be adversely affected by large swings in investment, and must therefore develop tools to control credit flows or risk relinquishing any independent monetary policy.

That was the finding of a paper presented at the Kansas City Federal Reserve's monetary policy symposium at Jackson Hole, which highlighted the global impact of the unconventional monetary policy of the United States and other major central banks.

Many countries including India and Brazil have recently suffered steep sell-offs in their currencies, linked in part to the prospect that the Fed might soon dial down the pace of its bond-buying monetary stimulus.

The Jackson Hole study highlights a shift in conventional economic thinking, which used to champion open flows of money between countries regardless of the consequences.

"Macroprudential policies are necessary to restore monetary policy independence for the non-central countries," wrote Helene Rey, professor at the London Business School.

"They can substitute for capital controls, although if they are not sufficient, capital controls must also be considered."

That is because countries with floating exchange rates, the dominant global practice, would be abdicating their control over interests rates and credit creation from sources outside their control, the paper said.

"Independent monetary policies are possible if and only if the capital account is managed, directly or indirectly via macroprudential policies," Rey said.

(Reporting by Pedro Nicolaci da Costa; Editing by Vicki Allen)

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)

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.