4 ms·

Not Finance person, but Fed not raising interest rate would evoke suspicion about how bad is it? it being the financial health of the system. This is more or l

Not Finance person, but Fed not raising interest rate would evoke suspicion about how bad is it? it being the financial health of the system. This is more or less in line with expectations.

pclmulqdq 4y ago
The press release is pretty telling about how bad it is. From the second paragraph: > The U.S. banking system is sound and resilient. That is something like saying "the house is not falling down" - you don't need to say it if the house isn't at risk of falling down. I think the statement is true right now, but they are hoping to stem the bleeding on bank balances. From later: > Russia's war against Ukraine is causing tremendous human and economic hardship and is contributing to elevated global uncertainty. While true, it's hard to think that they aren't planning to set up a scapegoat here.
- sremani 4y ago
  Never take a rumor seriously, unless it is officially denied.
- lanza 4y ago
  > That is something like saying "the house is not falling down" - you don't need to say it if the house isn't at risk of falling down. I think the statement is true right now, but they are hoping to stem the bleeding on bank balances. If somebody asks "is the house falling down" and you ignore the question then that's worse than responding "no."
  - pclmulqdq 4y ago
    I think that would be the only innocuous reason to include that line, but nobody really asked. The treasury and the FDIC have both been taking a lot of actions, like setting up 12-figure lines of credit and having banks deposit money in each other, without the market really "asking" for it, which makes me think that there's a decent chance that something is actually wrong (my guess here is that Bank of America may be insolvent on paper, depending on the duration of their outstanding loans and bonds). If the FOMC believed the system was strong, there was probably a lot of debate at the meeting as to whether to include anything. If not, the line would be included 100%.
- unethical_ban 4y ago
  Given how herdlike and irrational mass economies are, I don't think saying "were fundamentally stable" means the opposite.
dragonwriter 4y ago
> Not Finance person, but Fed not raising interest rate would evoke suspicion about how bad is it? OTOH, to the extent the banking turmoil and recession risk is a problem, the hike directly makes it worse. That may not be a better choice than something that merely signals that you think it is worse.
- whimsicalism 4y ago
  Makes it worse in the short-term, but if you continue to steer boat off course the more drastic the course corrections will have to be later on. If we are timid now, it will only require larger course corrections later if we want to get inflation under control. The longer we wait, the more inflation gets baked into expectations and pricing.
SkyPuncher 4y ago
That was my read on the situation as well. SVB was supposed to be an isolated event. While they were large, they were not "too large to fail". If their failure was enough to rattle the entire system, things are in serious trouble.
01100011 4y ago
Exactly. Fed was boxed in. 0bps and it would have sent a signal that things were more serious than currently accepted. 50bps and the market would have panicked. 25bps was widely anticipated and doesn't rock the boat, even if it fails to seriously combat inflation.

Not Finance person, but Fed not raising interest rate would evoke suspicion about how bad is it? it being the financial health of the system. This is more or less in line with expectations.

pclmulqdq 4y ago

The press release is pretty telling about how bad it is. From the second paragraph: > The U.S. banking system is sound and resilient. That is something like saying "the house is not falling down" - you don't need to say it if the house isn't at risk of falling down. I think the statement is true right now, but they are hoping to stem the bleeding on bank balances. From later: > Russia's war against Ukraine is causing tremendous human and economic hardship and is contributing to elevated global uncertainty. While true, it's hard to think that they aren't planning to set up a scapegoat here.

sremani 4y ago
Never take a rumor seriously, unless it is officially denied.
lanza 4y ago
> That is something like saying "the house is not falling down" - you don't need to say it if the house isn't at risk of falling down. I think the statement is true right now, but they are hoping to stem the bleeding on bank balances. If somebody asks "is the house falling down" and you ignore the question then that's worse than responding "no."
- pclmulqdq 4y ago
  I think that would be the only innocuous reason to include that line, but nobody really asked. The treasury and the FDIC have both been taking a lot of actions, like setting up 12-figure lines of credit and having banks deposit money in each other, without the market really "asking" for it, which makes me think that there's a decent chance that something is actually wrong (my guess here is that Bank of America may be insolvent on paper, depending on the duration of their outstanding loans and bonds). If the FOMC believed the system was strong, there was probably a lot of debate at the meeting as to whether to include anything. If not, the line would be included 100%.
unethical_ban 4y ago
Given how herdlike and irrational mass economies are, I don't think saying "were fundamentally stable" means the opposite.

dragonwriter 4y ago

> Not Finance person, but Fed not raising interest rate would evoke suspicion about how bad is it? OTOH, to the extent the banking turmoil and recession risk is a problem, the hike directly makes it worse. That may not be a better choice than something that merely signals that you think it is worse.

whimsicalism 4y ago
Makes it worse in the short-term, but if you continue to steer boat off course the more drastic the course corrections will have to be later on. If we are timid now, it will only require larger course corrections later if we want to get inflation under control. The longer we wait, the more inflation gets baked into expectations and pricing.

SkyPuncher 4y ago

That was my read on the situation as well. SVB was supposed to be an isolated event. While they were large, they were not "too large to fail". If their failure was enough to rattle the entire system, things are in serious trouble.

01100011 4y ago

Exactly. Fed was boxed in. 0bps and it would have sent a signal that things were more serious than currently accepted. 50bps and the market would have panicked. 25bps was widely anticipated and doesn't rock the boat, even if it fails to seriously combat inflation.