The Alchemists: Three Central Bankers and a World on Fire
Page 55
Outright Money Transactions (OMT), 382–84
powers of, 81
president, selection of, 298
prohibitions, going beyond, 221–22, 320–21
thirty-year secrecy rule, 136, 230–32
European Central Bank (ECB) remedies
austerity programs. See Deficit reduction
BNP Paribas bailout (2007), 3–4, 111
bond purchases by. See Securities Markets Programme (SMP)
and central banker. See Draghi, Mario; Trichet, Jean-Claude
effectiveness of, 286–87, 295, 317
errors and fiscal crisis, 135–37, 212–13, 303–5
Geithner on bolder moves, 219, 226, 324
and Greek debt restructuring, 312–16
to Greek financial crisis, 209–13, 215–19
interest rate cuts (2011), 344, 353
interest rate hike (2008), 137, 160
interest rate hike (2011), 303–4
internal devaluation, 302–3
Ireland bailout, 283–84, 292–94
lack of coordination problem, 158–61
oversight of foreign banks, 216, 283–86, 294–96
tight money approach, 208–9
wall of money approach (2011), 350–53
European Commission, 75
European Economic Community, 74–75
European financial crises
British pound devaluation (1992), 72–73
German hyperinflation (1914–1918), 47–53
German hyperinflation, pre–Nazi era, 50–53, 60
Panic of 1866 (England), 26–28, 31–34
Stockholms Banco rise and fall, 17–24
of 2007–2012. See European financial crisis (2007–2012); Eurozone countries; individual countries
European financial crisis (2007–2012). See also individual countries
beginning of, 1–8, 111–12
BNP Paribas collapse, 1–4, 111
British crisis, 236–46, 251–52, 332–36
Federal Reserve interventions, 131–32, 153–55, 226–27, 229, 349–50
global interventions, 128–32, 161–63, 349–50
Greece crisis, 201–23, 285–91, 306–16
Iceland crisis, 284
Ireland crisis, 158–59, 283–84, 292–95
Italy crisis, 316–17, 316–23
mortgage-backed securities exposure, 129, 145, 159
Northern Rock PLC crisis, 125–28
Portugal crisis, 296–98
remedies. See Bank of England; European Central Bank (ECB); International Monetary Fund (IMF)
Spain crisis, 317–23
time line for, xi–xvii
worsening (2011–2012), 348–49, 354–55
European Financial Stability Facility, 230, 320
bank charter issue, 324, 326
European Parliament, 77
Eurozone. See also specific countries
bank stress tests (2010), 287–88
countries outside of, 77, 81–82, 291
creditor nations, 297, 301–2
debtor nations, 213–14, 301
debtor problems, differences in, 213–14, 302, 315
depression, countries in, 292, 303, 341, 389
economic unity, necessity of, 78–80, 212–13
Franco-German Declaration, 289–92
GIPSI nations, 213–14
imbalances, remedies for, 302–3
leadership changes by 2012, 294–96, 341–42, 348, 356
monetary policy decisions. See European Central Bank (ECB)
PIIGS nations, 213
political fissures, 289–92, 297, 304–5
private-sector involvement, 312–16
recession (2012), 354–55
U.S. economic functioning compared to, 78–80
Evans, Charles, 264, 275
economic actions advocated by, 337–38, 386–87
Exchange rate mechanism
British pound devaluation (1992), 72–73
exit of countries from, 74
Exchequer, chancellors. See Darling, Alistair; Osborne, George
Exit strategy, 259, 261
Fallon, Kieran, 140
Fannie Mae/Freddie Mac
conservatorship for, 141, 163
QE1 mortgage-backed securities purchases, 263
Federal Deposit Insurance Corporation (FDIC), 77–78
Federal Open Market Committee (FOMC)
attendees of, 118
housing bubble, central bankers fears (2005), 104–7
meetings, structure of, 119
quantitative easing (QE2), 254–55, 274–76
Teal Book, 262, 330
Federal Reserve
Board of Governors, 44–45
creation of, 35–36, 44–45
decision-making body. See Federal Open Market Committee
dissolution of charter (1928), 45
and end of inflation of 1970s, 69–71
establishment, difficulty of, 10–11
on exit strategy, 259, 261
Fed rules for journalists, 262–63
and financial crisis (2007–2012). See Bernanke, Ben; Federal Reserve remedies
past chairmen. See Burns, Arthur; Greenspan, Alan; Miller, G. William; Volcker, Paul
and post–World War II prosperity, 10
power, efforts to cut (2009), 169–76
public trust established, 71
reform after crisis. See U.S. financial reform
trading operations of, 277–78
Federal Reserve Act (1913), 45–46
emergency 13(3) provision, 133–34
Federal Reserve Bank (New York), 276–77
Federal Reserve Bank of Kansas City Economic Policy Symposium. See Jackson Hole conference
Federal Reserve remedies
Bernanke defends actions, 170–71, 176–77, 181–82
cash infusions. See Bailouts
Commercial Paper Funding Facility, 150–51
currency swaps, 130, 153–55, 227, 229, 349–50
European crisis interventions, 131–32, 153–55, 226–27, 229, 349–50
Fannie/Freddie conservatorship, 141, 163
Fed “try it all” approach, 149–51
interest rate cuts (2007–), 128, 163
interest rate hike (2014), 339
Maturity Extension Program, 331–32, 340
for money market funds, 150–51
nominal GDP targeting as topic, 338–39
Operation Twist, 331–32
Operation Twist 2, 340
quantitative easing (QE1), 263
quantitative easing (QE2), 255–80
Term Auction Facility (TAF), 131–32
Federal Reserve Transparency Act, 175–76
Feingold, Russell, 189
Feinstein, Dianne, 191
Feldman, Gerald D., 48
Feldstein, Martin, 79–80, 117
Felsenthal, Mark, 254
Ferdinand, Franz, 48
Ferguson, Roger, 99
Financial accelerator, 7, 58, 119, 132
Financial crises. See also European financial crises; U.S. financial crises
central bank errors during. See Central bank ineffectiveness
financial accelerator for, 7, 58, 119, 132
Japanese deflation (1990s), 84–92
Millennium Bridge analogy, 107–8
public debt crisis, effects of, 202
recessionary/inflationary. See Inflation; Recessions
runs on banks. See Bank failures
time line for, ix–xi
of 2007–2012. See European financial crisis (2007–2012)
; U.S. financial crisis (2007–2012)
Financial industry
home mortgages, risky products, 99–100
mortgage-backed securities as creation of, 101–2
risk taking and rewards, 107
Financial markets
central bankers’ comments, impact on, 9
decline (2001), 99
Flash Crash, 218–19, 243
global stock market decline (2009), 165
stock market drop (2008), 145
Financial reform. See U.S. financial reform
Financial Services Authority, 122, 234, 238
Financial Stability Board, 300
Fine, Camden, 178, 190, 196
Finland, anti-EU position, 297
First Name Club meeting (1910), 35–36, 43–44
Fischer, Stanley, 116
Fisher, Paul, 241
Fisher, Richard, 164, 187, 193, 196, 264, 275, 330, 332
Fixed-rate tender with full allotment, 3–4
Flaherty, Jim, 209
Flash Crash, 218–19, 243
Ford, Gerald, inflation, approach to, 67
France
central bank. See Banque de France
-England adversarial relationship, 55, 57
and European unity negotiations, 76–77, 81–82
Franco-German Declaration, 289–92
gold hoarding (1927–), 55, 58, 59
Great Depression, stability during, 55, 58, 59
inflation rate (1980s), 75
presidents. See Hollande, François; Sarkozy, Nicolas
steel and coal production pooling, 74–75
Franco-German Declaration, 289–92
Frank, Barney, 146, 170. See also Dodd-Frank Act
Free Banking Era, U.S., 39
Friedman, Stephen, 195
Frum, David, 66
Gang Fan, 372
Geithner, Timothy
and Bernanke reappointment, 182–83
defends Fed actions during crisis, 177–78
to ECB on bolder moves, 219, 226, 324
and financial reform process, 177–78, 186–87
on first day of crisis, 4, 5
and investment bank bailouts, 42, 133, 140, 142, 146–47
at Jackson Hole (2007), 111–12
-Trichet relationship, 219, 317
George, Edward, 7
Germany
bank crisis, beginning of (2008), 160
Berlin Wall, end of, 76–77
central bank. See Bundesbank
chancellors. See Kohl, Helmut; Merkel, Angela
coordinated plan, rejection of, 159–60
economy (2012), 354, 356
and European unity negotiations, 76–77, 81–82
Franco-German Declaration, 289–92
Great Depression, actions during, 57, 58–60
Greek bailout protests, 210–11, 288–89
Hitler rise and economic conditions, 50–53, 60
inflation rate (1980s), 75
mark as new currency (1923), 53
mark exchange rate fixed (1923), 54
post–World War I reparations, 49–50
prosperity of 1920s, 54
Reichsbank (1914–1918) caused hyperinflation, 47–53
steel and coal production pooling, 74–75
Wall Street crash (1929), impact on, 57, 58–60
Gertler, Mark, 119
Giles, Chris, 249
Gingrich, Newt, 330
GIPSI nations, 213, 217
ECB bond purchases, 286–87
Gladstone, William, 32
Glass, Carter, 44–45
Global economy
emerging nations collapse (1990s), 101
during Great Moderation, 94–95
Global Economy Meeting (2010), 223–32
Golden Dawn, 357–59, 378
Gold standard
abandoned during Great Depression, 60–61
abandoned during Nixon administration, 62–64
Bretton Woods (1944) gold window, 63
post–World War I, 54–55
Gonzalez, Henry B., 96
Grayson, Alan, 186
Great Britain
bank regulation. See Financial Services Authority
Black Friday (1866), 10, 26, 28
central bank. See Bank of England
empire, connection to banks, 10, 28–31
-France adversarial relationship, 55, 57
Great Depression, actions during, 60
during Great Moderation, 94
housing price increase (2005), 100
outside the eurozone, 77, 81–82, 291
Great Britain financial crisis, 236–46, 332–36
and Conservative Party victory, 244
deficit reduction, 237–38, 241–49
eurozone impact on, 333
inflation (2010–2011), 245, 251–52, 334
remedies. See Bank of England; King, Mervyn
stagflation (2010–2011), 251–53, 334
unemployment (2009–2011), 236, 248, 251, 334
worsening (2011–2012), 387–88
Great Depression
bailout (1929), 56
Bernanke as scholar of, 7–8, 119–20, 149–50
as central banking failure, 11, 60–61, 84–85, 132
Federal Reserve actions during, 56, 58
gold standard abandoned, 60
moralistic view of, 56–57
and Wall Street crash (1929), 54, 56–58
Great Inflation. See Inflation (1971–1979)
Great Moderation, 94–95, 98–99, 106–7
criteria, Jackson Hole Consensus on, 98
trouble, signs during, 104–7
Greece
central bank. See Bank of Greece
as eurozone member, 203
inflation (2000s), 203–4
Greece financial crisis, 201–23, 285–91, 306–16
bailouts (2010–2011), 215–19, 286–89, 310–11
budget deficit (2009), 201–2
causes of, 204–5
coalition government (2012), 356–58
debt restructuring (2011), 312–16
deficit reduction, 209–10, 215–16, 286, 287, 297, 302, 353–54
deficit reduction failure, 297, 308–9
ECB vague statement on, 212–13
euro, referendum on keeping, 343, 345, 357
German resentment of bailout, 210–12, 288–89
global impact of, 208, 213–14, 217–19
Greek borrowing costs (2010), 213, 215, 217
IMF involvement, 205–6, 211–12, 215–17, 285–86
Papandreou statement of need, 215, 306
and political fissures, 341–42, 354
privatization (2011), 309–16
public protests, 210, 217, 284, 285–86, 297, 306, 311, 354, 358–59, 378
quarterly monitoring meetings, 216, 285–86, 297
Trichet’s approach to, 206–8, 211–12, 218–19, 222–23
“troika” of interventionists, 285–86, 297
worsening (2011), 306, 311–12
Greenspan, Alan
end of tenure of, 93–94
on housing bubble, 104
interest rate cuts, 99
legacy of, 94
on low-risk premiums, 107
recessions during tenure, 95, 99
Gregg, Judd, 191
Groupe de Francfort, 326, 345
Group of 20 meeting (2010), 257, 273–74
Group of 20 meeting (2011), 344–47
Group of Seven meeting (2010), 207–8
Guf
fey, Roger, 95–96
Gurney, Samuel, 26–27
Gustavus Adolphus, king of Sweden, 19
Hamilton, Alexander, 36–37
Hamlin, Charles S., 57
Hankey, Thomson, 34
Hansen, George, 71
Harris, Ethan, 265
Harrison, George L., 56
Harvey, Ernest, 60
Havenstein, Rudolf von, 221
and post–World War I hyperinflation, 47–53
Hayami, Masaru
background information, 89
and Japanese financial crisis (1990s), 87–88, 90–92
Heinze, F. Augustus, 40–41
Heinze, Otto, 40–41
Heline, Oscar, 61
Hemingway, Ernest, 51
Hildebrand, Philipp, 161
Hilsenrath, Jon, 262
Hitler, Adolf, rise of, economic factors in, 11, 52–53, 60
Hoenig, Thomas M.
QE2, objection to, 256, 258, 264, 265, 271, 275–76
U.S. financial reform position, 179–80, 187, 195–96, 199
Holland, Henry Lancelot, 32–33
Hollande, François, initial actions as president, 356
Home mortgages
easy-term products, 99–100
as investment device. See Mortgage-backed securities
risk related to, 102
Hoover, Herbert, 58
House Committee on Financial Services, 169–71
Household debt, increase in (2005), 100–101
Housing prices
central bankers fears (2005), 104–8
end of boom, signs of, 106
housing price increase (2005), 99–100, 103–4
Japan, price run-up (1990s), 85–86
Hubbard, Glenn, 117
Hu Jintao, 347, 363
Hurley, John, 158
Hutchinson, Kay Bailey, 196, 198–99
Hyun Song Shin, 107–8, 129
Iceland financial crisis, 284
Ichimada, Hisato, 86
Independent Community Bankers of America, 178–79, 196
Inflation
European countries, varying rates of, 75
German hyperinflation (1914–1918), 47–53
German hyperinflation, pre–Nazi era, 11, 50–53
Great Britain (2010–2011), 245, 251–52, 334
Greece (2000s), 203–4
low, negative effects, 260, 270
low U.S. levels (2010), 260
price increases, self-perpetuation of, 65–66, 134–35
Stockholms Banco creation of, 22–23
United States 1970’s. See Inflation (1971–1979)
Inflation (1971–1979), 62–71
Carter-era actions, 67–71
central bank ineffectiveness, 65–67
Ford era actions, 67
gold standard abandoned, 62–64
money supply/interest rate increase as remedy, 69–71