Donald Kohn to Leave Fed at End of Term as Vice Chairman

March 2, 2010 by · Leave a Comment
Filed under: Policy News 

Who Obama chooses as his replacement will be very important and is to be watched.  Vice Chairman Kohn has been an establishment at the Federal Reserve for over four decades.  Even though I personally have issue with many of the policies responses in crisis, Donald does have a wealth of knowledge after being near the helm for over 40 years and they will lose some of that wisdom when he steps down at the end of his term.  Mr. President choose wisely, the markets will be watching very closely.

Vice Chairman of the Fed

Vice Chairman of the Fed

Business Week –  Donald Kohn will leave the Federal Reserve at the end of his four-year term as vice chairman after helping Ben S. Bernanke and Alan Greenspan steer the U.S. through recessions and crises.

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Fed’s Donald Kohn wants to use low interest rates to encourge people into riskier assets

November 18, 2009 by · Leave a Comment
Filed under: Policy News 

I love the opening line of this press release:  The Federal Reserve’s low interest rate policy is meant to encourage investors to move into riskier assets in order to promote economic recovery. Let me translate this, we have chosen to punish savers by making interest rates at close to zero so instead of investing in U.S. treasuries which are considered the “safest” form of investment we want you to speculate on risky investments in the middle of a “jobless recovery” that sounds suspiciously like a recession.  I don’t see how getting people to invest in other assets is somehow connected to making credit easier to access.  Interest rates clearly don’t reflect the real risk in the economy at present.

Reuters, Chicago – The Federal Reserve’s low interest rate policy is meant to encourage investors to move into riskier assets in order to promote economic recovery, and there are no signs currently the policy is resulting in the build-up of a U.S. asset bubble, the central bank’s number-two official said on Monday.

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Fed’s Kohn warns less independence & autonomy may cause higher interest rates

July 9, 2009 by · Leave a Comment
Filed under: Opinion 

As you know in this previous post, I was in agreement on the technical basis, that an perceived erosion in the Federal Reserve’s independence would be back in the short-term.  The reasoning was on the basis that foreign investors would become scared that the money printing would accelerate and that would devalue all dollars so to compensate for this, the investors would demand higher yields on new treasury issues.

BUT, I do take issue with the statement farther down in the article that quotes Donald Kohn as saying this about the bill in audit the Federal Reserve via the GAO (General Accounting Office), “Such legislation is “contrary to the public interest” because investors may see it as “undermining monetary independence,” Kohn said. “Such an action would increase inflation fears and market interest rates and, ultimately, damage economic stability and job creation.”

What this tells me is that the books for Fed are so messed up, that a full audit would send the market into a panic.  If that is the case then the audit is what is really needed to restore confidence.  I don’t buy the argument that somethings are better to not be known for our own good.  That is an area that is ripe for abuse because of the opaqueness.

News (Bloomberg):

Federal Reserve Board Vice Chairman Donald Kohn said any “substantial erosion” of the central bank’s independence in setting interest rates may fuel investor fears of inflation and provoke higher long-term borrowing costs.

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