Can we have too little inflation?

February 19, 2015 at 9:56 am Leave a comment

Yes we can and it’s the most important metric that the Fed will look at as it moves closer to a likely decision  to start raising short-term interest rates by the middle of the year. That is my main takeaway from the recently released minutes of the Fed’s Open Market Committee, the group that decides what short-term interest rates should be.

Falling energy prices are pushing inflation further below its 2% objective. Falling pump prices keep more money in people’s wallets but they also make a wide range of products cheaper to make and sell.  Normally this is good news but a downward spiral of prices-of the type Europe is seeking to avoid-can have just as pernicious an impact on economic growth as inflation can. Margins get so squeezed that companies can’t cost effectively grow. So you can bet that the Fed won’t raise rates until it knows that inflation is on the way. As the minutes explained:

“A number of participants emphasized that they would need to see either an increase in market-based measures of inflation compensation or evidence that continued low readings on these measures did not constitute grounds for concern”.

Here is a link to the minutes for those of you having trouble sleeping,

http://www.federalreserve.gov/monetarypolicy/files/fomcminutes20150128.pdf

Compensation for mortgage “victims?”

Does this bother you as much as it bothers me? Or am I just still in a bad mood because the good people of Albany this morning drove as if they lived in Miami and have never seen snow falling?

When it comes to assigning blame in the mortgage meltdown I’ve never been  a big fan of the “Consumer as victim” line of argument. I’ve always considered the American home buyer more of a willing co-conspirator than a victim of the of the mortgage mess.   Like Buffalo Springfield says “Nobody is right if every body’s wrong.”

The latest example of how the Government’s flailing inconsistent and at times incoherent response to the Mortgage Meltdown missed the mark comes from the OCC.  In a   January 2013 settlement  between federal bank regulatory agencies and 13 mortgage servicers servicers  provided $3.6 billion in cash payments to borrowers whose homes were in any stage of the foreclosure process in 2009 or 2010.  The payments ranged from several hundred dollars to $125,000 plus lost equity. The shoddy practices of these servicers such as robo-signings- allegedly exacerbated the huge nationwide increase in foreclosures.

Did servicers act sloppily? Absolutely. Were there large numbers of homeowners who wouldn’t have faced foreclosure but for these practices? Absolutely not.  People lost their homes because they couldn’t afford them.

So I’m not all that surprised by this News Release issued yesterday afternoon by the OCC. It appears that Nearly 600,000 checks mailed to borrowers of these 13 servicers remain outstanding, and have now expired.  The checks have been reissued.   “As part of the agencies’ ongoing efforts to reach these borrowers, the paying agent was directed to conduct additional searches of updated addresses.  The current mailing represents the third attempt directed by the agencies to provide checks to in-scope borrowers.”

http://www.occ.gov/news-issuances/news-releases/2015/nr-ia-2015-22.html

 

 

 

Entry filed under: Economy, General. Tags: .

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Authored By:

Henry Meier, Esq., 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.

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