The Son of Finance of the Great Age

  Chapter 543 The first loss in history (7)

   On September 18, as Soros said before, after a six-hour closed-door meeting, the Federal Reserve announced that it would cut interest rates by 50 basis points, from the previous 5.25 to 4.75.

  But no one knows that in the FOMC meeting, there was a serious dispute. This dispute not only came from differences in views on the market, but also from other factors, that is, whether there was a leak.

   Ben Bernanke, who succeeded Greenspan as the chairman of the Federal Reserve, is a bald guy. Because he has been pampered for a long time, he can't see that he is close to sixty years old. His white beard is his iconic feature. After taking over as chairman of the Federal Reserve in 2006, he was under tremendous pressure, naturally because his predecessor did too well.

  Greenspan experienced six presidents and sat on the position of chairman of the Federal Reserve for 20 years. Under his rule, the United States experienced two periods of economic prosperity and avoided economic downturn or depression several times. Even to some extent, Greenspan has more widespread influence than the US president himself.

Bernanke, who succeeded Greenspan, graduated from Harvard University, received a doctorate from the Massachusetts Institute of Technology, and later became a professor at Stanford University. Nominated to be chairman of the Federal Reserve, formally succeeding Greenspan.

  In the past year, it can be said that Bernanke's monetary policy was quite satisfactory, and there was nothing outstanding and nothing that could be criticized. However, at the FOMC meeting in March 2007, Bernanke did not take the subprime housing mortgage incidents of New Century Financial Corporation and HSBC North America seriously, and even said that the US housing market will continue to remain strong. remarks. As a member of the decision-making committee, Geithner, president of the Federal Reserve Bank of New York and later US Treasury Secretary, also declared in August, "There is no indication that large diversified institutions will encounter any financing pressure."

On the other hand, another part of the Fed's decision-making committee has expressed enough concern about the market, including Yellen, the president of the Federal Reserve Bank of San Francisco, who previously warned of problems in the US housing market and pointed out that the market The "shadow banking" that is prevalent in the world is getting out of control, which will accelerate the deterioration of the financial market situation. After pointing out these problems, she actively called for the Fed to take strong measures to deal with the current market situation, but unfortunately, these measures were not adopted.

  Beginning in August, the subprime mortgage crisis began to spread to the bond market, stock market and other capital markets, and only then did officials of the Federal Reserve begin to face up to this problem. But at this time, most of the economists inside the Federal Reserve still believe that the subprime mortgage crisis is within the controllable range and will not lead to serious consequences similar to the recession of the US economy.

In any case, the doves and hawks within the Fed finally came to an agreement to cut rates by 50 basis points after this meeting to avoid the risk of a sharp slowdown in economic growth that would most likely lead to a recession . Although many people internally believed that such a rate cut might stimulate inflation, Bernanke resisted the pressure.

  After the round table meeting finally reached an agreement, the staff began to be busy drafting a public statement. Although everyone was exhausted after a long discussion, the 12 committee members did not stay idle and began to discuss some other things, even market rumors.

   "About our discount policy, so far, it has been proven to be effective. Regarding our consideration of the discount rate reduction, the market does not seem to have predicted that this time we have finally come to the front of the market."

  The vice chairman of the Fed, Timothy Geithner, president of the Federal Reserve Bank of New York, said with great interest. At the age of 46, he is in the prime of life and is a representative of the young and strong faction within the Federal Reserve. He is also considered to be one of the most likely candidates to succeed Bernanke in the future. Graduated from Johns Hopkins University, he served four U.S. treasury ministers. He became the president of the Federal Reserve Bank of New York in 2003 and has now taken the position of vice chairman of the Federal Reserve.

Just on the 16th of last month, the Federal Reserve decided to lower the discount rate in an emergency video conference, which injected funds and vitality into the market in a disguised form. Coupled with today’s policy of lowering interest rates, the two work together to promote market liquidity.

    Geithner's excitement is well-founded. For a long time, the Fed's policy decisions have been the focus of the market's attention, and before each FOMC meeting, predictions about what measures the Fed will take are flying all over the sky, and some of them are even more accurate to the point of outrageous . The direct consequence of this kind of prediction is that the effect of the Fed's policy implementation is directly discounted, because the market has already produced related changes due to expectations, and changes in related variables will eventually lead the Fed to reflect on or even adjust the policy. .

  The unforeseen policy adjustments in the market can maximize the original intention of these policy decisions, adjust the direction of the market, and achieve the desired goals of the Fed.

  In the final analysis, this is also a game.

But as soon as Geithner finished speaking, Gad Luck, the president of the Richmond Federal Reserve Bank, immediately frowned and said unceremoniously: "Vice Chairman Geithner, do you mean what you just said?" So, what we think about the discount rate, or what we might do, the banks don't know in advance?"

   Geithner was startled, not understanding what the other party meant by saying that, and subconsciously replied: "Yes, of course."

Seeing that the other party still didn't understand what he meant, Gerd Lack frowned even tighter. After thinking for a while, he said leisurely: "Vice Chairman Geithner, I listened to the president of the Bank of America BOA and his colleagues this afternoon. The conversation with CEO Ken Lewis, who apparently expressed his gratitude to Geithner for changing the discounting tool. So it looks like I'm getting different information than you."

  Hearing this, Geithner's face turned red immediately, and he realized what Gad Luck was implying that he leaked secrets to large financial institutions before the Fed announced it to the public. This behavior is naturally not allowed, and if this name is confirmed, his prestige in the Open Committee of the Federal Reserve will be greatly reduced.

  Hearing the conversation between the two men, the other committee members stopped discussing and turned their attention to the two men. The content they discussed was a sensitive topic, which naturally attracted everyone's attention. For a while, the entire conference room was silent, and everyone waited with bated breath for Geithner's explanation.

At this moment, Bernanke coughed lightly, turned everyone's attention to himself, then waved his hands to ease the serious atmosphere, and then said: "Okay, thank you, Mr. Lacker. Please continue, Vice Chairman Geithner."

Seeing that he had no way to escape, Geithner had no choice but to bite the bullet and said: "Mr. Chairman, members, I can't speak for Ken Lewis, and I can't stop him from saying something. What is the scope of power of the bank? What policies do we have on windows, those are the areas that I help them understand. I think for other areas, we all have a responsibility to help financial institutions understand their powers. Because people usually don't use discounting very much, so In a way, they don’t know much about discounting tools.”

  From the beginning to the end, he did not directly respond to whether he leaked information about BOA, but only emphasized that he was helping BOA better understand discount services. But everyone present knew in their hearts that this kind of avoidance of the important and trivial was not justified at all, and he still couldn't get rid of the suspicion of leaking secrets.

  Although in principle the members of the committee are not allowed to divulge FOMC secrets, but in fact before the meeting, they always have to accept interviews with reporters and express their opinions on the current market. As long as interested reporters visit all the people attending the meeting, they can summarize their overall opinions on the market, and then accurately predict the upcoming policies of the Federal Reserve. This is also a kind of leak.

  In fact, since he became the chairman of the Federal Reserve, Bernanke himself has a queen reporter who can publish some inconvenient things in the newspaper at an appropriate time. Strictly speaking, this can be regarded as a leak.

  Although the content of the current discussion will not be released to the public in five years, but no one wants to give people a clue, so when Geithner and Rucker exchange words, everyone else remains silent. And it doesn't make much sense to continue to delve into this issue. At that moment, Bernanke coughed lightly, and answered in embarrassment: "Vice Chairman Geithner is right. As the staff of the Federal Reserve, we do have an obligation to help the bank understand certain powers. Next, let's discuss The possible changes in the financial market after the interest rate cut, so that we can discuss at the FOMC meeting next month, what will be the effect of today’s policies.”

  Others naturally would not continue to dig deeper on this issue, so they bypassed this topic with a tacit understanding and continued the discussion.

  …

  Affected by the Federal Reserve’s interest rate cut, the S&P 500 index rose 43.13 points on this day, rising from 1476 points at the opening to 1519 points, an increase of 2.92%. The Dow Jones Industrial Average rose 335.97 points, or 2.51%.

  The market responded positively to the Fed's rate cut.

   And in the next two days, Wall Street's fourth largest investment bank, Lehman Brothers, also released its third-quarter performance report. In the report, Lehman Brothers' third-quarter earnings were US$887 million, equivalent to US$1.54 per share. Although it has declined compared with the same period last year, it is generally better than market expectations. Prior to this, the market forecast that Raymond's third-quarter earnings per share was only $1.47.

   This performance boosted the U.S. stock market, and Raymond Brothers was even more proud. Since February, their stock price has fallen by about 30% due to frequent negative news involving the subprime mortgage bond market. On the day of the results announcement, their stock price rose by 3%, standing firmly on the $60 mark.

  The performance was better than expected, coupled with the rise in stock prices, the analysts of Lehman Brothers naturally began to talk about the market. They said that despite losses in the CDO market and a roughly $700 million decline in fixed income, the Fed's decisive action combined with the worst being over as investors worried about investment bank performance due to the credit crunch Psychology has been greatly relieved.

Raymond Brothers Chief Financial Officer (CFO) Chris O'Meara told the market that he is confident that it is foreseeable that the confidence in the credit market is slowly recovering, and that the credit crunch has greatly improved, and the worst in the market The time has passed. While this may be the end of the latest lucrative cycle, the future certainly looks good. The risks arising from the CDO market can now be largely forgotten.

  …

   "Zhong Sheng, how dare this guy say that, is he crazy?"

In front of the TV, after Jiang Shan quietly listened to O'Meara's speech, he could not believe it. He did not believe what the other party said. During the latest investigation, he saw more Residents are abandoning or about to abandon their houses, and this trend is showing a growing trend.

   Thanks to book friends 140124234238290 and Si Wuxie for voting for the monthly ticket!

  (end of this chapter)