The Federal Reserve’s June minutes are out and as usual offer good insight into the FOMC’s thinking when it comes economic confidence and recovery (more positive) as well as its opinion on rates (still dovish).
But they also reveal a new preoccupation with matters related to exit strategy and financial plumbing.
Here’s the section we’re referring to (H/T David Beckworth)
While generally agreeing that an ON RRP facility could play an important role in the policy normalization process, participants discussed several potential unintended consequences of using such a facility and design features that could help to mitigate these consequences. Most participants expressed concerns that in times of financial stress, the facility’s counterparties could shift investments toward the facility and away from financial and nonfinancial corporations, possibly causing disruptions in funding that could magnify the stress.
Tracy Alloway hosted a session on the “death of a financial intermediary” at last week’s Camp Alphaville.
The discussion featured Renaud Laplanche, CEO of Lending Club, Cormac Leech, bank analyst at Liberum Capital, Krishan Rattan, founder of Voltaire Capital and Matt Levine, Bloomberg View columnist.
There’s a good note from Goldman Sachs this week on the implications of negative rates at the ECB.
But given that many of the points echo much of the discussion already featured on FT Alphaville for years, we’ll cut straight to the interesting bits.
Goldman agree there isn’t anything conceptually special about negative rates because bond math works with negative numbers (as it’s focused on real returns). However, they add, there is a specific reason why negative rates might have qualitatively different macroeconomic implications, unless controls on cash were put in place with them: Read more
Citi’s Hans Lorenzen contemplates the implications of a possible negative deposit rate at the ECB.
The relevant DBW (death of banks watch) quote is this: Read more
Introducing a new series tracking the slow death of the traditional investment banking model (if not banking itself).
Just to round up the recent spate of gawd awful Q1 results from the banking sector: Read more