en.wikipedia.org/wiki/Greenspan_put
3 corrections found
continual quantitative easing
This overstates Yellen-era policy. The Fed ended its asset-purchase program in October 2014, raised rates starting December 16, 2015, and began balance-sheet normalization in October 2017.
Full reasoning
Official Federal Reserve materials show that Janet Yellen’s tenure did not involve "continual quantitative easing."
- In its February 2015 Monetary Policy Report, the Fed stated that the FOMC ended the asset purchase program at the end of October 2014.
- On December 16, 2015, the Board said it raised the interest rate paid on reserve balances to 0.50 percent and directed the Desk to maintain the federal funds rate in a target range of 1/4 to 1/2 percent.
- In September 2017, the FOMC announced that in October it would initiate a balance-sheet normalization program that would gradually reduce securities holdings.
Those are tightening or normalization steps, not continual QE. So describing Yellen’s policy as involving "continual quantitative easing" is factually inaccurate.
3 sources
- FRB: Part 2: Monetary Policy
At the end of October, the FOMC ended the asset purchase program that began in September 2012...
- Federal Reserve Board - Implementation Note issued December 16, 2015
The Board of Governors... voted unanimously to raise the interest rate paid on required and excess reserve balances to 0.50 percent, effective December 17, 2015.
- The Fed - Overview
On September 20, 2017, the FOMC announced that in October it would initiate a balance sheet normalization program that will gradually reduce the Federal Reserve's securities holdings...
recreated the Greenspan put by providing repurchase agreements to Wall Street investment banks as a way to boost falling asset prices
The Fed’s September 2019 repo operations were launched to keep the federal funds rate within the target range and relieve money-market strains, not as an asset-price support program.
Full reasoning
The Federal Reserve’s own descriptions of the September 2019 repo operations contradict the article’s stated purpose.
- The New York Fed’s September 17, 2019 operating-policy statement says the repo operation would be conducted "in order to help maintain the federal funds rate within the target range".
- A 2020 Federal Reserve note reviewing the episode says overnight money-market rates spiked amid reserve drains tied to corporate tax payments and Treasury settlement, and that the repo operations helped rates in repo and fed funds markets return closer to normal.
Those official explanations describe a money-market stabilization operation aimed at interest-rate control and funding-market functioning. They do not describe the 2019 repo operations as being undertaken "to boost falling asset prices."
2 sources
- Statement Regarding Repurchase Operation - Federal Reserve Bank of New York
The Open Market Trading Desk... will conduct an overnight repurchase agreement (repo) operation... in order to help maintain the federal funds rate within the target range of 2 to 2-1/4 percent.
- What Happened in Money Markets in September 2019?
In mid-September 2019, overnight money market rates spiked... amid a large drop in reserves due to the corporate tax date and increases in net Treasury issuance... Following the repo operations... the distribution of rates in both markets reverted closer to the average distributions observed over the year the next day.
commencing quantitative tightening
Quantitative tightening had already begun before Powell became Fed chair. The FOMC announced the balance-sheet normalization program in September 2017 and started it in October 2017; Powell became chair on February 5, 2018.
Full reasoning
This phrase misstates the timeline.
- The Federal Reserve says the FOMC announced on September 20, 2017 that in October it would initiate a balance-sheet normalization program that would gradually reduce securities holdings.
- The Board’s biography for Jerome Powell says he first took office as Chair on February 5, 2018.
So Powell did not "commence" quantitative tightening as chair in 2018; the balance-sheet runoff had already started months earlier under Janet Yellen.
2 sources
- The Fed - Overview
On September 20, 2017, the Federal Open Market Committee (FOMC) announced that in October it would initiate a balance sheet normalization program...
- Jerome H. Powell, Chair
Powell first took office as Chair of the Board of Governors of the Federal Reserve System on February 5, 2018, for a four-year term.