Questions, Questions, Questions

Janet Yellen is answering Senator’s questions this week. Here are a few that I would love to ask:

1. Is there any limit to the Fed’s balance sheet? Before the crisis the Fed owned about $900 billion in securities. In five years that has more than quadrupled to $3.8 trillion. Has anyone ever done this before? How big is too big?

2. Is the Fed’s supervisory role compromised by its monetary mandate? Might bank regulators be tempted to go easy at the wrong time? Is this a public choice problem?

3. Speaking of regulation, what do you think of the Consumer Finance Protection Board? It’s nominally under the Fed. What tools or training does the current Fed need to oversee this new agency?

4. Finally, what is the mechanism that translates asset purchases by the Fed (QE) into higher employment? How do lower mortgage rates and higher stock prices create middle-class jobs? Are we trying to spin straw into gold?

I have great respect for Dr. Yellen’s work; I believe that she will make fine Fed Chair. (Anyone wanting to read her speeches can go here or here.) But we’re in uncharted policy waters. I don’t think anything like these questions will be asked. But it would be great if they were.

Douglas R. Tengdin, CFA

Chief Investment Officer

By | 2013-11-14T11:46:52+00:00 November 14th, 2013|Global Market Update|0 Comments

About the Author:

Mr. Tengdin is the Chief Investment Officer at Charter Trust Company and author of “The Global Market Update”. The audio version of each post can be heard on radio stations throughout New England every weekday. Mr. Tengdin graduated from Dartmouth College, Magna Cum Laude. He received his Master of Arts from Trinity Divinity School, Magna Cum Laude and received his Chartered Financial Analyst (CFA) designation in 1992. Mr. Tengdin has been managing investment portfolios for over 30 years, working for Bank of Boston, State Street Global Advisors, Citibank – Tunisia, and Banknorth Group. Throughout his career, Mr. Tengdin has emphasized helping clients manage their financial risks in difficult environments where they can profit from investing in diverse assets in diverse settings. - Leave a comment if you have any questions—I read them all! - And Follow me on Twitter @GlobalMarketUpd

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