bart
05-18-08, 05:49 PM
Former Federal Reserve governor, Robert Heller, had this to say in the Wall Street Journal on October 27, 1989:
"The stock market is certainly not too big for the Fed to handle. The foreign exchange and government securities markets are vastly larger. Daily trading volume in the New York foreign exchange market is $130 billion. The daily volume for Treasury Securities is about $110 billion. The combined value of daily equity trading on the New York Exchange, the American Stock Exchange and the NASDAQ over-the-counter market ranges between $7 billion and $10 billion."
...
"An appropriate institution should be charged with the job of preventing chaos in the market: the Federal Reserve....The Fed already buys and sells foreign exchange to prevent disorderly conditions in foreign exchange markets. The Fed has assumed a similar responsibility in the market for government securities. The stock market is the only major market without a marketmaker of unchallenged liquidity or a buyer of last resort." ... "The Fed could support the stock market directly by buying market averages in the futures market, thus stabilizing the market as a whole."
<hr>
“Owing to persistent advances in information and computing technologies, the structure of our financial institutions is continuously changing, I trust for the better. But that evolution in financial structure has also meant that supervision and regulation must be continually changing in order to respond adequately to these developments. In today's markets, for example, there is an increased reliance on private counterparty surveillance as the primary means of financial control. Governments supplement private surveillance when they judge that market imperfections could lead to sub-optimal economic performance.”
Source (http://www.federalreserve.gov/boarddocs/speeches/2002/200209252/default.htm), Alan Greenspan speech in 2002
<hr>
"...the Federal Reserve has the capacity to operate in domestic money markets to maintain interest rates at a level consistent with our economic goals” Ben Bernanke, Fed Chairman, March 26th 2007 to the Senate Banking Committee.
<hr>
"There is some evidence that central bank communications can help to shape public expectations of future policy actions and that asset purchases in large volume by a central bank would be able to affect the price or yield of the targeted asset."
Source: (http://www.federalreserve.gov/pubs/feds/2004/200448/200448pap.pdf) Monetary Policy Alternatives at the Zero Bound, Ben Bernanke
<hr>
"When we moved on February 4th, I think our expectation was that we would prick the bubble in the equity markets. What in fact occurred is that, as evidence of the dramatic shift in the economic outlook began to emerge after we moved and long-term rates began to move up, we were also clearly getting a major upward increase in expectations of corporate earnings. While the stock market went down after our actions on February 4th, it has gone down really quite marginally on net over this period. So what has occurred is that while this capital gains bubble in all financial assets had to come down, instead of the decline being concentrated in the stock area, it shifted over into the bond area. But the effects are the same. These are major capital losses, which have required very dramatic changes in the actions and activities on the part of individuals and institutions.
"So the question is, having very consciously and purposely tried to break the bubble and upset the markets in order to sort of break the cocoon of capital gains speculation, we are now in a position—having done that and in a sense succeeded perhaps more than we had intended—to try to restore some degree of confidence in the System."
-- Alan Greenspan, Chairman of the Federal Reserve
Source: (http://www.federalreserve.gov/fomc/transcripts/1994/940322Meeting.pdf) Federal Open Market Committee (FOMC) meeting minutes from March 22, 1994
(emphasis mine)
"The stock market is certainly not too big for the Fed to handle. The foreign exchange and government securities markets are vastly larger. Daily trading volume in the New York foreign exchange market is $130 billion. The daily volume for Treasury Securities is about $110 billion. The combined value of daily equity trading on the New York Exchange, the American Stock Exchange and the NASDAQ over-the-counter market ranges between $7 billion and $10 billion."
...
"An appropriate institution should be charged with the job of preventing chaos in the market: the Federal Reserve....The Fed already buys and sells foreign exchange to prevent disorderly conditions in foreign exchange markets. The Fed has assumed a similar responsibility in the market for government securities. The stock market is the only major market without a marketmaker of unchallenged liquidity or a buyer of last resort." ... "The Fed could support the stock market directly by buying market averages in the futures market, thus stabilizing the market as a whole."
<hr>
“Owing to persistent advances in information and computing technologies, the structure of our financial institutions is continuously changing, I trust for the better. But that evolution in financial structure has also meant that supervision and regulation must be continually changing in order to respond adequately to these developments. In today's markets, for example, there is an increased reliance on private counterparty surveillance as the primary means of financial control. Governments supplement private surveillance when they judge that market imperfections could lead to sub-optimal economic performance.”
Source (http://www.federalreserve.gov/boarddocs/speeches/2002/200209252/default.htm), Alan Greenspan speech in 2002
<hr>
"...the Federal Reserve has the capacity to operate in domestic money markets to maintain interest rates at a level consistent with our economic goals” Ben Bernanke, Fed Chairman, March 26th 2007 to the Senate Banking Committee.
<hr>
"There is some evidence that central bank communications can help to shape public expectations of future policy actions and that asset purchases in large volume by a central bank would be able to affect the price or yield of the targeted asset."
Source: (http://www.federalreserve.gov/pubs/feds/2004/200448/200448pap.pdf) Monetary Policy Alternatives at the Zero Bound, Ben Bernanke
<hr>
"When we moved on February 4th, I think our expectation was that we would prick the bubble in the equity markets. What in fact occurred is that, as evidence of the dramatic shift in the economic outlook began to emerge after we moved and long-term rates began to move up, we were also clearly getting a major upward increase in expectations of corporate earnings. While the stock market went down after our actions on February 4th, it has gone down really quite marginally on net over this period. So what has occurred is that while this capital gains bubble in all financial assets had to come down, instead of the decline being concentrated in the stock area, it shifted over into the bond area. But the effects are the same. These are major capital losses, which have required very dramatic changes in the actions and activities on the part of individuals and institutions.
"So the question is, having very consciously and purposely tried to break the bubble and upset the markets in order to sort of break the cocoon of capital gains speculation, we are now in a position—having done that and in a sense succeeded perhaps more than we had intended—to try to restore some degree of confidence in the System."
-- Alan Greenspan, Chairman of the Federal Reserve
Source: (http://www.federalreserve.gov/fomc/transcripts/1994/940322Meeting.pdf) Federal Open Market Committee (FOMC) meeting minutes from March 22, 1994
(emphasis mine)