tag:blogger.com,1999:blog-602664611343971452.post3494871097469782241..comments2024-01-06T08:57:16.475-05:00Comments on Trust Your Instincts: Fed says less to JP Morgan's fortress balance sheet than meets the eyeAnonymoushttp://www.blogger.com/profile/11316888485290662469noreply@blogger.comBlogger2125tag:blogger.com,1999:blog-602664611343971452.post-51671857872122487922013-03-16T12:41:12.247-04:002013-03-16T12:41:12.247-04:00Based on my experience working at the Fed, while i...Based on my experience working at the Fed, while it tends to favor the banking establishment, it is not a cartel operating solely for the benefit of the banks.<br /><br />The Fed really is staffed by individuals who believe in their responsibility to ensure the safety and soundness of the financial system.<br /><br />The Fed's questioning JP Morgan's fortress balance sheet is one of those times where it is trying to communicate to the market something about just how much risk the banks have.<br /><br />The Fed felt empowered to take this stand because it had just said that JP Morgan passed its stress test.<br /><br />Therefore, it saw the fallout from communicating risk as minimal (remember, there is a huge internal constraint that the Fed places on itself due to worries about safety and soundness; they fear saying a bank has problems and triggering a bank run).<br /><br />Since the beginning of the financial crisis, I have been saying that the Fed would be a far more effective regulator if banks were required to provide ultra transparency. It would unshackle the Fed to actually do its job and not worry about market perception.<br /><br />This isn't a deeper con, but rather the Fed staff trying to express what the true level of risk at JP Morgan/Goldman through the muzzle of safety and soundness.Anonymoushttps://www.blogger.com/profile/11316888485290662469noreply@blogger.comtag:blogger.com,1999:blog-602664611343971452.post-73114273534361277812013-03-15T21:22:19.544-04:002013-03-15T21:22:19.544-04:00One thing I don't understand is this:
If the ...One thing I don't understand is this:<br /><br />If the Fed is really just a cartel operating in favor of the banking establishment, which is point made by numerous bloggers, then why would the Fed take this position? Is there a deeper con being run here? What's the story?Anonymousnoreply@blogger.com