Fed Stimulus to Continue, Oh Boy!

June 7, 2012 at 7:21 am Leave a comment

Federal Reserve Vice Chairman Janet Yellen forcefully signaled that she’s in favor of extending the Fed’s bond buying program known as Operation Twist when Fed policy makers meet later this month to ruminate about the state of the economy.  Coupled with comments from other Federal Reserve officials, it looks more than likely that the Fed will continue to buy agency-backed securities, including mortgage-backed securities, with maturities of between six and thirty years in order to keep down borrowing costs.  For those of you who are interested in this stuff, I just got through reading Yellen’s speech and it provides very good context as to what the Fed has done and why she feels that more needs to be done.  As for the economy, she cites the Devil’s trifecta of moribund fiscal policy, political troubles in Europe, and continuing weakness in the housing market to argue that the Fed has the flexibility it needs to continue to supply stimulus to the economy without triggering inflation.

The interesting question is whether this is good news for credit unions.  Increasingly, it’s getting harder to answer that question in the affirmative.  What this policy means is that for the foreseeable future, it is impossible to see how we are supposed to safely grow our money.  I also am beginning to wonder if the Fed is backing itself into a situation of diminishing returns.  To the extent that the markets expect Fed intervention, are they truly stimulating economic growth or simply safeguarding the anemic economic performance we are currently experiencing.  Bottom line, the Fed policy may be necessary, but it is another example of how credit unions and their members, for that matter, are paying a disproportionate price for a financial crisis they didn’t create.

Heading off to the Sagamore for our annual convention.  I hope to see many of you there.

Entry filed under: General. Tags: , , , .

Are We Facing a Data Breach Pearl Harbor? More Regulatory Fallout

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

Trackback this post  |  Subscribe to the comments via RSS Feed


Authored By:

Henry Meier, Esq., Senior Vice President, General Counsel, New York Credit Union Association.

The views Henry expresses are Henry’s alone and do not necessarily reflect the views of the Association. In addition, although Henry strives to give his readers useful and accurate information on a broad range of subjects, many of which involve legal disputes, his views are not a substitute for legal advise from retained counsel.

Enter your email address to subscribe to this blog and receive notifications of new posts by email.

Join 653 other followers

Archives