Boston Fed’s Rosengren Says Fed Should Consider a Wider Range of Assets (Whoomp, There It Is!) Unusual and Exigent Circumstances
Boston Fed President Eric Rosengren is joining the “unconstrained rate manipulation squad” by calling for The Fed to purchase more than just Treasuries and Agency MBS.
(Bloomberg) — Federal Reserve Bank of Boston President Eric Rosengren said policy makers should be allowed to buy a broader range of assets if they lack sufficient ammunition to fight off a recession with interest-rate cuts and bond purchases. With 10-year U.S. Treasury yields notes already at record lows, Rosengren said typical quantitative easing may not work as it did during the 2008 financial crisis. Therefore, the Fed may need the flexibility “enjoyed” by policy makers in Europe and Japan.
U.S. law currently limits Fed purchases to “any obligation which is a direct obligation of, or fully guaranteed as to principal and interest by, any agency of the United States.” That translates to buying U.S. government and agency debt and mortgages issued by federal housing agencies.
Remember, Maiden Lane LLC? The loan to Maiden Lane LLC loan was extended under the authority of Section 13(3) of the Federal Reserve Act, which permitted the Board, in unusual and exigent circumstances, to authorize Reserve Banks to extend credit to individuals, partnerships, and corporations.
Will The Fed declare unusual and exigent circumstances, like they did with Bear Stearns, JP Morgan Chase and Maiden Lane?
Perhaps The Fed will add stocks, corporate bonds and real estate citing unusual and exigent circumstance.
Fear is driving markets … and Central Banks.