Warum Powell Finanz­stabilität vor Inflations­bekämpfung stellen wird

Der Wirtschaftshistoriker Niall Ferguson schreibt bei Bloomberg über die Lehren aus früheren Bankenkrisen:
  • For central banks throughout history, there has been a recurrent tension between price stability and financial stability. Raising short-term interest rates acts as a brake on economic activity by increasing the cost of credit throughout the financial system. But raising rates can also break financial intermediaries such as banks. It’s close to impossible to apply brakes to the economy without breaking something — even if investors and policymakers never tire of fantasies about soft landings, immaculate deleveragings or Goldilocks scenarios.“ – bto: In der Tat haben wir darauf gewartet, aber wohl kaum eine solche Krise erwartet.
  • Here in the US, the key question in the short run is how much this effort to avert a banking crisis is going to undercut the effort to bring down inflation (…) History offers some clues as to the answer.“ – bto: Wobei angesichts der deutlich höheren Verschuldung die Geschichte nur bedingt eine Antwort geben kann. Ich denke, es muss um Finanzstabilität gehen.
  • The measures were extraordinary. First, with the help of the Treasury Department and the Federal Reserve, the Federal Deposit Insurance Corporation (FDIC) invoked the ‘systemic risk exception’ to protect uninsured deposits at SVB and Signature. Second, the Fed and the Treasury used the Federal Reserve Act’s 13(3) emergency authority to create a Bank Term Funding Program (BTFP) to lend against Treasuries and Agencies, at par — in other words at face value with no haircuts — for a year. Access will be anonymous, with the identities of the banks who apply kept secret for a year.“ – bto: Man tut so, als hätte es keine Verluste gegeben.
  • „(…)the Fed and the FDIC have (…) implicitly extended deposit insurance to all deposits, and not just those in excess of $250,000. That is not a trivial commitment of taxpayers’ money. At the same time, they have created yet another device to expand the Fed’s balance sheet at a time when that is supposed to be shrinking. JPMorgan estimates that the Fed might end up lending as much as $2 trillion to banks. That would spell the end of Quantitative Tightening (QT). Indeed, the BTFP might turn out to be just the latest iteration of Quantitative Easing, unless there is minimal take-up by banks. Thus far, it’s been minimal: $11.9 billion by Wednesday. But the Fed balance sheet overall expanded by nearly $303 billion, in the forms of borrowing through the discount window and for banks seized by the FDIC, erasing all the QT the Fed has done since mid-November.” – bto: … was wiederum alles sagt.
  • More broadly, the authorities have redefined the meaning of the word ‘systemic.’ If losses on SVB’s uninsured deposits posed a systemic risk, then every medium-sized bank that screws up is a systemic risk. As my Hoover colleague John Cochrane has pointed out, the hundreds of pages of regulation produced in the wake of the 2008/2009 financial crisis defined quite clearly which institutions were systemically significant and regulated them differently. My own 2018 prediction that the Dodd-Frank regime would disintegrate on contact with the next financial crisis has proved right.“ – bto: … weil man in den Abgrund blickt.
  • Several commentators cast their minds back to the rescue of Continental Illinois in 1984, the largest bank failure in US history until the 2008/2009 financial crisis. Paul Volcker, then Fed chairman, was persuaded to protect the bank’s uninsured deposits for the sake of financial stability.“ – bto: Es gibt also eine Tradition der Rettung.
  • If one goes back to the FOMC transcript of May 21-22, 1984, Volcker would also have preferred to continue with monetary tightening at that juncture: But, unfortunately, I don’t think that course of action is open to us. I look at this financial market as being on a knife’s edge. I don’t believe all this business about policy at this point working at the margin with a nice little rise in interest rates slowing things down here and there. … If you want to see a group of ashen-faced bankers, sit down in a group and talk to them about the Continental situation and possible repercussions for the funding of their own banks against the background of this LDC [less developed countries] situation and what that might mean in terms of their own behavior and policies. (….) My bottom line is that we’ve run out of room for the time being for any tightening, given this situation.“ – bto: Was soll man auch machen? Es ist klar, dass Banken immer das Risiko eines Runs haben, selbst die bestgeführten. Genauso wird die Fed auch diesmal aufhören, die Zinsen zu erhöhen.
  • Yet there is a key difference between Volcker’s action in 1984 and what happened last week. Unlike Powell in March 2023, Volcker had already conquered inflation two years before. Moreover, although Volcker said he had ‘run out of room for the time being for any tightening,’ in fact the Fed continued to raise rates after the Continental Illinois rescue. And this was at a time when 12-month average CPI inflation was around 3.5%.“ bto: Damals, wie gesagt, bei deutlich geringerer Inflation!
  • The authoritative historian of the Fed, the late Allan Meltzer, summed up the 1984 story: Between March and August the funds rate increased from an average 9.9 to an 11.6% rate. The operating target for adjustment plus seasonal borrowing remained at $1 billion during this period, but in order to avoid the appearance of internal problems, fewer banks were borrowing. Growth of the monetary base and money slowed.“ – bto: Volcker hat also entgegen der gemachten Äußerungen weiter das Geld verknappt.
  • As Meltzer rightly noted, the 1970s had been different. So let’s go all the way back there. Because a better historical analogy for our purposes today may well be the rescue of the Detroit-based Bank of the Commonwealth in January 1972. Like SVB, Commonwealth grew too rapidly before a hiking cycle. Between 1964 and 1970 the bank’s assets tripled in size to $1.2 billion. On the assets side, its strategy, much like SVB’s, was to put assets in high-yielding, long-term fixed-income instruments. Commonwealth’s holdings of municipal bonds rose from 7% of its assets in 1964 to 22% in 1969. However, interest rates also began rising in 1969—the effective federal funds rate rose from 6.3% to above 9% — as the Fed responded to inflationary pressures, and the value of munis plummeted. Commonwealth sought to tap the international Eurodollar markets by opening a branch in the Bahamas. After word got out that the Fed had refused its application to do so, a bank run ensued. Michigan state law did not allow interstate acquirers and the existing banks in the state were already too concentrated. The choice was between bailing Commonwealth out or letting it go under.“ – bto: Das ist interessant. Ich kannte diese Geschichte noch nicht. Was mir einleuchtet ist, dass damals scheinbar gerettet wurde und das, obwohl die Inflation nicht unter Kontrolle war.
  • Bending the rules of that time, the FDIC ruled that Commonwealth was “essential” (the 1970s word for ‘systemic’) because of its ‘service to the black community in Detroit, its contribution to commercial bank competition in Detroit and the upper Great Lakes region, and the effect its closing might have had on public confidence in the nation’s banking system.’ Fed Chair Arthur Burns agreed to assist Commonwealth ‘with all the money it needed to stay open.’  The bailout was not a free lunch for stockholders, to be sure. Commonwealth had to reduce the par value of all outstanding stock from $45.5 million to $7.9 million to absorb the losses from the sale of its municipal bonds.“ – bto: das passt in der Tat zur SVB.
  • This episode occurred between the 1969-70 and the 1973-75 recessions, at a time when inflationary pressures appeared to be abating. Consumer price inflation (seasonally adjusted) had come down from a high of 6.4% in February 1970 to below 3.3% at the end of 1971. Although inflation rose back to nearly 3.8% in February 1972, however, the Burns Fed held the discount rate steady at 4.5%, down from 5% in October 1971. The rate remained there throughout 1972, even as inflation began to pick up in the second half of the year. Measured by the federal funds effective rate, monetary policy eased significantly in January and February 1972. By the end of 1973 inflation was at 9%.“ – bto: Wir sehen also, dass die Inflation aufgrund der Maßnahmen zugunsten der Finanzstabilität nicht unter Kontrolle gebracht wurde.
  • There is a warning from history here for the Powell Fed. In the face of the first sign of financial distress, the Fed and the FDIC have intervened to give implicit coverage to all uninsured depositors and to establish a new and potentially large line of credit for banks carrying losses on their bond portfolios. But what about inflation?“ – bto: Aber hat die Fed wirklich eine Wahl? Ein Bankenkollaps würde in eine Depression münden.
  • The argument will certainly be made by some at the next FOMC meeting that, under these circumstances of financial fragility, there should also be a pause in rate hikes. (…) Market participants — who just a few weeks ago were speculating about a 50-basis-point rate hike — now think there is close to a one in three chance the Fed will stand pat and a one in four chance of a rate cut in June.“ – bto: Und dann gehen die Börsen richtig nach oben.
  • With inflationary pressures still discernible, as even the economists of ‘Team Transitory’ admit, the situation seems closer to that of 1972. If, like Arthur Burns more than 50 years ago, Powell combines the alleviation of financial distress with a premature pause in monetary tightening, he risks repeating one of the key mistakes of the Fed in the Seventies.“ – bto: … ein durchaus denkbares Szenario.
  • “My guess is that next week’s FOMC meeting produces a 25-basis-point hike precisely because Powell does not want to be remembered as the heir of Burns. (…) If, however, he chooses instead to pause — signaling to markets that this tightening cycle is over — I may have to reiterate an earlier observation. I knew Paul Volcker. Is Jay Powell Paul Volcker? Give me a break.“ – bto: Dazu kann ich nichts sagen. Aber es ist schon eine harte Aussage.

bloomberg.com (Anmeldung erforderlich): „History of Banking Crises Holds a Warning for Jay Powell“, 19. März 2023