BERNANKE’S FINAL ACT – POLITICO’s M.J. Lee and Ben White with Kate Davidson: “And for his final act, Ben Bernanke took his foot off the gas.
The Federal Reserve chairman, wrapping up a tumultuous eight-year term in which he helped the nation fight back from the worst recession since the 1930s, said … the central bank will begin pulling back on its unprecedented stimulus efforts, arguing the economy is finally gaining enough strength for the Fed to begin its long-awaited retreat. … Investors embraced both the Fed’s message and its policy moves sending stock markets to record highs following the announcement. … The Fed’s maneuvering may seem technical and eye-glazing. The term ‘quantitative easing’ is not one most people use over the dinner table.
“But the central bank’s decision … represents a declaration from Bernanke, on his way out the door, that the economy is finally healing and no longer requires the kind of massive emergency help the Fed began to apply following the financial crisis and subsequent recession … ‘This is the first change in policy since 2006 which as been away from the direction’ of stimulus, said Ian Shepherdson of Pantheon Macroeconomics. ‘In the great scheme of things it does not seem like a big deal but when you think about the fact that it’s the first time in seven years that they have moved this way you see that it’s a very big deal.””
NEW ERA OF PREDICTABLE POLICY? — “The Fed’s move means ‘predictable monetary policy for the next year or more and that’s bullish for markets and positive for the economy,’ said David Kotok, chief investment officer and Cumberland Advisors. Couple that with more predictable fiscal policy in Washington, and some economists are looking for 2014 growth closer to 3 percent, which should mean faster wage and job growth, lower deficits and possibly a transformed political landscape.
“Bernanke said that because unemployment remains high at 7 percent, the central bank believes it should not abandon its bond buying program immediately. He also said that the Fed will likely work to keep short-term interest rates at current levels ‘well past’ the point at which the unemployment rate dips below 6.5 percent, a decision that also pleased investors” http://bit.ly/1bRbZ8B
MARKETS TAKE IT IN STRIDE — HFE’s Jim O’Sullivan: “The Fed’s tapering announcement was a bit of a surprise, but hardly a shock. While we thought officials would hold off for one more meeting, the case for starting the process was already quite strong. In any event, markets took the $10B tapering in stride, with the S&P 500 rallying by 1.7% and bond yields virtually unchanged relative to pre-announcement levels. Fed officials appear to have successfully communicated the message that tapering is not tightening, and a hike in the funds rate is not imminent.”
SHE CALLED IT — S&P’s Beth Ann Bovino in June: “While the Federal Reserve has hinted in its June statement that it may begin tapering its asset purchases as soon as September (we expect the Fed will want a meeting followed by a press conference to give it the attention it deserves), it has tied the move to a strengthening jobs markets and stable inflation. … We now expect the Fed will start tapering purchases in December, after the fiscal fog from both the debt ceiling and continuing resolution has passed. Our baseline forecast sees little risk of a return to recession, or deflation.”
WHY IT’S HAPPENING — Reuters’ Lucia Mutikani on yet another positive economic data point: “U.S. housing starts surged to their highest in nearly six years in November, a sign of strength in the economy that underscores the Fed’s … decision to start cutting back its monthly bond purchases. The Commerce Department said … housing starts jumped 22.7 percent, the biggest increase since January 1990, to a seasonally adjusted annual rate of 1.09 million units. That was the highest level since February 2008.
Groundbreaking increased 1.8 percent in October to an 889,000 unit pace
http://reut.rs/1dnTKHb
GOLDILOCKS TAPER RALLY KEEPS ROCKING — Bloomberg: “Asian stocks rose after the Fed … showed enough confidence in the U.S. labor market to taper asset purchases while still promising to hold interest rates close to zero. … ‘It’s a win win for markets,’ Shane Oliver, who helps oversee $131 billion as head of investment strategy at AMP Capital Investors Ltd. in Sydney … ‘They are more optimistic on the employment rate and the economy while still keeping loose monetary policy in place with low rates to support the economy. We’re happy to stay overweight equities and if anything buy a bit more.’” http://bit.ly/1bR16Ai]
BAUCUS TO CHINA SETS OFF MUSICAL CHAIRS – Top Dem emails this musical chairs scenario following the announcement (scooped by POLITICO’s Maggie Haberman and Manu Raju) that President Obama will nominate Senate Finance Chairman Max Baucus to be the next ambassador to China: “Baucus gets confirmed for China (because they only need 50). Rockefeller takes Finance (until he retires in 2014). Schumer then takes Finance (waiting for Reid to retire. You may have seen Harry talked about staying ‘another 8 years’). Sherrod Brown gets Banking. So, Machiavelli might say that the China apt. for Baucus makes PERFECT sense (if you’re a Dem Senator).”
POLITICO’s Haberman and Raju: Sen. Max Baucus, the veteran Montana Democrat who has served in the Senate since 1978, is expected to be nominated by the White House to serve as the next U.S. ambassador to China, according to several sources …
Baucus began informing some of his colleagues and his staff about his upcoming nomination on Wednesday evening … If he leaves before his term ends, Baucus would relinquish his gavel on the powerful Senate Finance Committee at a time when he is still aggressively pushing for a dramatic rewrite of the Tax Code, putting its chances in peril this Congress.
“The Montana Democrat, who has been a central figure in battles over trade, taxes and health care for a generation, has already announced he will not run for reelection in 2014. And if he leaves early, Baucus will be opening up a Senate seat in a competitive state where Democratic Gov. Steve Bullock appoints the senator when there is a vacancy.
Already, Lt. Gov. John Walsh (D) is running for the open seat against Rep. Steve Daines (R), the freshman congressman whom Republicans believe is in the strongest position to win the race. Indeed, not only does the departure of the third longest-serving senator rattle an institution where seniority is paramount, but it also could very well shake up the 2014 landscape where Republicans need to pick up a net of six seats to recapture the Senate majority. Bullock is expected to name Walsh to the seat, Democratic sources say, a move that could give him a leg up in a race that could determine control of the Senate next year” http://bit.ly/1bR16Ai
VALERIE JARRETT REWIND — Thanks to the many who packed the room for our MM Breakfast with Senior White House Advisor Valerie Jarrett, who made news on a number of fronts including announcing the administration’s strong support for the proposal from Sen. Jack Reed (D-R.I.) to extend emergency jobless benefits for at least three months. Jarrett also denied a New York Times report that she was taking over planning for Obama’s post-presidential library and that the president was already deep into fundraising efforts for the library.
She also said she is not a “shadow chief of staff” who whispers in the president’s ear after hours in the residence. Instead she said by that time of evening if she is with the Obamas it is just to talk personal stuff. And she has no plans to leave: “I have the best job that I have ever had and will ever have … I serve at the pleasure of the president ... I'll be there as long as he'll have me." Full video: http://politi.co/1i2Mczt Post-game debrief: http://politi.co/JJBM9J
FIRST LOOK: STUFF THAT WENT RIGHT IN 2013 — New Bloomberg Businessweek cover story for the year-end double issue, on newsstands Friday, features economics editor Peter Coy on 8.5 things that went right this year (the Fed taper is #8). Here are the top three: “1. Peace Breaks Out in D.C. — The biggest welcome surprise of 2013 was the uneasy year end cease-fire in Congress, which was impossible to predict a year ago; 2. Medical Bills: Just What The Doctor Ordered — Prices for health care rose just 1.1 percent in the third quarter of 2013 from a year earlier, the smallest increase since 1962;
“3. Women on the March — Janet Yellen, Mary Barra, Angela Merkel, Park Guen Hye, Kathleen Taylor, Chile’s female runoff presidential candidates… women everywhere continued to make impressive economic and political gains” Story: http://buswk.co/19dNN2L Cover image: http://bit.ly/1cSb3C0
THIS MORNING ON POLITICO PRO FINANCIAL SERVICES – Republicans are urging regulators to provide Volcker Rule relief to small and mid-sized banks [http://politico.pro/JEcr0h] … To learn more about Pro's subscriber-only coverage -- and to get Morning Money every day before 6 a.m. -- please contact Pro Services at (703) 341-4600 or [email protected].
** For the political junkies and history buffs on your list, check out the POLITICO Bookshelf gift guide http://politi.co/18XmjhP **
GOOD THURSDAY MORNING — Programming note: Only two more M.M.’s for 2013. We go dark Tues. Dec. 24th through Thurs. Jan. 2nd. I know it will be hard on all of us, but we will get through it together.
DRIVING THE DAY — White House looks to take back the offensive on Obamacare with state-by-state reports that “highlight the benefits … that have already been implemented … Treasury Secretary Jack Lew attends a meeting of the Financial Stability Oversight Board … Initial jobless claims at 8:30 a.m. expected to dip to 334K from 368K … Index of leading indicators at 10:00 a.m. expected to rise 0.7% … Existing home sales at 10:00 a.m. expected to dip to 5.02M from 5.12M …
MURRAY BACKING OFF HER OWN BUDGET? — POLITICO’s Austin Wright: “Sen. Patty Murray is distancing herself from a cut in military pensions in the budget deal she brokered with Rep. Paul Ryan. Her unease about a key element of her own deal, which passed the Senate on Wednesday and is now headed to President Barack Obama, comes amid a backlash from veterans groups and Senate defense … Murray’s response: The pension cut isn’t final. ‘We wrote this bill in a way that will allow two years before this change is implemented so that Democrats and Republicans can keep working to either improve this provision or find smarter savings elsewhere,’ she said on the Senate floor …
“Her stance provides a major opening for opponents of the cut to work to get it tossed out or replaced with alternate savings — an effort that could weaken the budget deal and force vulnerable senators to continue defending their support for an agreement that would provide sequester relief for federal agencies at the expense of veterans. … [Murray’s] also promising a ‘fix’ next year that would exempt all disabled veterans. And at least one person close to the issue is pointing a finger at Murray’s Republican counterpart, the chairman of the House Budget Committee.” http://bit.ly/1c2qMyd
TAPER FLY AROUND –
INVESTORS CHEER — WSJ’s E.S. Browning: “The stock market soared, a sign of investors' hope that a recovering economy will offset future Fed moves, permitting stocks to continue rising. The rally pushed the Dow Jones Industrial Average to its 45th record in 2013 and left the blue-chip index on the verge of something it hasn't seen in almost 14 years: a record in inflation-adjusted terms. … To hit an inflation-adjusted record the Dow needs to reach 16186.39, according to calculations by economics professor William Hausman at the College of William & Mary. ... Even bond markets, which have the most to lose, reacted mildly to the announcement. The yield of the 10-year Treasury note rose to 2.885% late Wednesday. That was up from 2.842% on Tuesday, but still well below the 3% level it reached in September.” http://on.wsj.com/JJMgGg
FED HEAVY ON THE CAVEATS — NYT’s Binyamin Appelbaum: “[T]he Fed sought to offset concerns that it was once again pulling back too soon by strengthening its plans to hold short-term interest rates near zero, which officials regard as a more powerful means of stimulating growth. … The Fed’s shift in policy, in effect, means it plans to do less now and more later.
“That is a result of a compromise that has been months in the making between a group of officials convinced that the economy needs more help, and a range of internal critics who regarded the bond-buying campaign as ineffective or dangerous. … Investors appeared to agree with Mr. Bernanke, defying predictions that stock prices would retreat along with the Fed’s pullback” http://nyti.ms/1i2Utn1
BERNANKE GETS HIS SYMBOLIC GESTURE — FT’s John Authers: “The Federal Reserve’s programme of quantitative easing, which it is now winding down, has been a momentous step into the unknown. But some rules of central banking never change. As ever, the words that accompanied its announcement on monetary policy matter far more than the substance of the policy behind it. Ben Bernanke has the symbolic gesture he wanted before he leaves … [T]he Fed has sent the signal it wanted — that the era of open-ended easy money is coming to an end, but only while promising that rates will stay historically low long past next year.” “ http://on.ft.com/1bRcegC
FED CHAIR HEADS INTO HISTORY — WP’s Neil Irwin: “When Ben Shalom Bernanke finishes his workday and walks out the doors of the Federal Reserve’s white marble building on Constitution Avenue for the last time on Jan. 31, he will also be walking into history. He has guided the nation’s economy — and its central bank — through as tumultuous a period as it has faced in its hundred years of history. He will leave behind an utterly transformed institution. And whatever happens in the decades to come, he will be one of the most important shapers of economic policy of the 21st century” http://wapo.st/1jjUoN7
ALSO FOR YOUR RADAR –
VIDEO CLICK — ICYMI, WH Council of Economic Advisors Chairman Jason Furman joined Third Way Resident Scholar Bill Schneider on Wednesday for a discussion on economic growth and the middle class. Video: http://cs.pn/1cBzX5k
REGULATORS MAY OFFER GUIDANCE ON VOLCKER — WSJ’s Ryan Tracy: “U.S. banking regulators are considering issuing guidance to address concerns about the Volcker rule's impact on some small and midsize banks … The new guidance, which is being considered barely a week after the voluminous rule's release, comes as concerns mount that banks will take a hit to their capital levels or earnings as a result of a provision that some analysts interpret as prohibiting firms from investing in collateralized-debt or collateralized-loan obligations.
“The regulatory guidance could give banks time to sort out how the new rules apply to them but may not lift the ban on those types of investments … However, regulators could explain the rule's exceptions to help banks understand whether their investments qualify for exemption or need to be shed. … Some banks have stakes in CDOs or CLOs — bundles of mortgages, corporate loans or other debt, which can be risky since the collateral backing the obligations is often of lower quality. A fact sheet for smaller banks, issued with the Volcker rule, says banks that bought into the bundles of loans, rather than organizing the investments themselves, will have to divest themselves of them as part of the rule's ban on certain types of risky activity. That could mean a write-down for some institutions just before a year-end accounting deadline” http://on.wsj.com/19TZFkW
SAC TRADER FOUND GUILTY — FT’s Kara Scannell: “A former top aide to SAC Capital’s founder was found guilty of insider trading … handing the US government another victory in its long-running crackdown on Wall Street corruption. After just a day of deliberations the jury convicted Michael Steinberg, a former SAC portfolio manager, of five counts of conspiracy and securities fraud for trading shares of Dell and Nvidia after learning confidential earnings results in 2008 and 2009 from his research analyst.
The verdict was slightly delayed after Steinberg appeared to faint before it was delivered, …
“The trades netted more than $1m in profits for SAC, the eponymous hedge fund founded by Steven Cohen. Mr Steinberg faces up to 20 years in prison. The US attorney’s office in Manhattan has not lost an insider trading case since its crackdown began in 2009. Mr Steinberg is the 77th person to be convicted of insider trading. The trial was the toughest test of insider trading yet for the government since its case rested largely on the testimony of Jon Horvath, the former SAC analyst who pleaded guilty in a deal with the government.” http://on.ft.com/1becFBt
** ‘Tis the season to gift a good book. For the political junkies and history buffs on your list, check out the POLITICO Bookshelf’s most notable books of 2013. http://politi.co/18XmjhP **
The Federal Reserve chairman, wrapping up a tumultuous eight-year term in which he helped the nation fight back from the worst recession since the 1930s, said … the central bank will begin pulling back on its unprecedented stimulus efforts, arguing the economy is finally gaining enough strength for the Fed to begin its long-awaited retreat. … Investors embraced both the Fed’s message and its policy moves sending stock markets to record highs following the announcement. … The Fed’s maneuvering may seem technical and eye-glazing. The term ‘quantitative easing’ is not one most people use over the dinner table.
“But the central bank’s decision … represents a declaration from Bernanke, on his way out the door, that the economy is finally healing and no longer requires the kind of massive emergency help the Fed began to apply following the financial crisis and subsequent recession … ‘This is the first change in policy since 2006 which as been away from the direction’ of stimulus, said Ian Shepherdson of Pantheon Macroeconomics. ‘In the great scheme of things it does not seem like a big deal but when you think about the fact that it’s the first time in seven years that they have moved this way you see that it’s a very big deal.””
NEW ERA OF PREDICTABLE POLICY? — “The Fed’s move means ‘predictable monetary policy for the next year or more and that’s bullish for markets and positive for the economy,’ said David Kotok, chief investment officer and Cumberland Advisors. Couple that with more predictable fiscal policy in Washington, and some economists are looking for 2014 growth closer to 3 percent, which should mean faster wage and job growth, lower deficits and possibly a transformed political landscape.
“Bernanke said that because unemployment remains high at 7 percent, the central bank believes it should not abandon its bond buying program immediately. He also said that the Fed will likely work to keep short-term interest rates at current levels ‘well past’ the point at which the unemployment rate dips below 6.5 percent, a decision that also pleased investors” http://bit.ly/1bRbZ8B
MARKETS TAKE IT IN STRIDE — HFE’s Jim O’Sullivan: “The Fed’s tapering announcement was a bit of a surprise, but hardly a shock. While we thought officials would hold off for one more meeting, the case for starting the process was already quite strong. In any event, markets took the $10B tapering in stride, with the S&P 500 rallying by 1.7% and bond yields virtually unchanged relative to pre-announcement levels. Fed officials appear to have successfully communicated the message that tapering is not tightening, and a hike in the funds rate is not imminent.”
SHE CALLED IT — S&P’s Beth Ann Bovino in June: “While the Federal Reserve has hinted in its June statement that it may begin tapering its asset purchases as soon as September (we expect the Fed will want a meeting followed by a press conference to give it the attention it deserves), it has tied the move to a strengthening jobs markets and stable inflation. … We now expect the Fed will start tapering purchases in December, after the fiscal fog from both the debt ceiling and continuing resolution has passed. Our baseline forecast sees little risk of a return to recession, or deflation.”
WHY IT’S HAPPENING — Reuters’ Lucia Mutikani on yet another positive economic data point: “U.S. housing starts surged to their highest in nearly six years in November, a sign of strength in the economy that underscores the Fed’s … decision to start cutting back its monthly bond purchases. The Commerce Department said … housing starts jumped 22.7 percent, the biggest increase since January 1990, to a seasonally adjusted annual rate of 1.09 million units. That was the highest level since February 2008.
Groundbreaking increased 1.8 percent in October to an 889,000 unit pace
http://reut.rs/1dnTKHb
GOLDILOCKS TAPER RALLY KEEPS ROCKING — Bloomberg: “Asian stocks rose after the Fed … showed enough confidence in the U.S. labor market to taper asset purchases while still promising to hold interest rates close to zero. … ‘It’s a win win for markets,’ Shane Oliver, who helps oversee $131 billion as head of investment strategy at AMP Capital Investors Ltd. in Sydney … ‘They are more optimistic on the employment rate and the economy while still keeping loose monetary policy in place with low rates to support the economy. We’re happy to stay overweight equities and if anything buy a bit more.’” http://bit.ly/1bR16Ai]
BAUCUS TO CHINA SETS OFF MUSICAL CHAIRS – Top Dem emails this musical chairs scenario following the announcement (scooped by POLITICO’s Maggie Haberman and Manu Raju) that President Obama will nominate Senate Finance Chairman Max Baucus to be the next ambassador to China: “Baucus gets confirmed for China (because they only need 50). Rockefeller takes Finance (until he retires in 2014). Schumer then takes Finance (waiting for Reid to retire. You may have seen Harry talked about staying ‘another 8 years’). Sherrod Brown gets Banking. So, Machiavelli might say that the China apt. for Baucus makes PERFECT sense (if you’re a Dem Senator).”
POLITICO’s Haberman and Raju: Sen. Max Baucus, the veteran Montana Democrat who has served in the Senate since 1978, is expected to be nominated by the White House to serve as the next U.S. ambassador to China, according to several sources …
Baucus began informing some of his colleagues and his staff about his upcoming nomination on Wednesday evening … If he leaves before his term ends, Baucus would relinquish his gavel on the powerful Senate Finance Committee at a time when he is still aggressively pushing for a dramatic rewrite of the Tax Code, putting its chances in peril this Congress.
“The Montana Democrat, who has been a central figure in battles over trade, taxes and health care for a generation, has already announced he will not run for reelection in 2014. And if he leaves early, Baucus will be opening up a Senate seat in a competitive state where Democratic Gov. Steve Bullock appoints the senator when there is a vacancy.
Already, Lt. Gov. John Walsh (D) is running for the open seat against Rep. Steve Daines (R), the freshman congressman whom Republicans believe is in the strongest position to win the race. Indeed, not only does the departure of the third longest-serving senator rattle an institution where seniority is paramount, but it also could very well shake up the 2014 landscape where Republicans need to pick up a net of six seats to recapture the Senate majority. Bullock is expected to name Walsh to the seat, Democratic sources say, a move that could give him a leg up in a race that could determine control of the Senate next year” http://bit.ly/1bR16Ai
VALERIE JARRETT REWIND — Thanks to the many who packed the room for our MM Breakfast with Senior White House Advisor Valerie Jarrett, who made news on a number of fronts including announcing the administration’s strong support for the proposal from Sen. Jack Reed (D-R.I.) to extend emergency jobless benefits for at least three months. Jarrett also denied a New York Times report that she was taking over planning for Obama’s post-presidential library and that the president was already deep into fundraising efforts for the library.
She also said she is not a “shadow chief of staff” who whispers in the president’s ear after hours in the residence. Instead she said by that time of evening if she is with the Obamas it is just to talk personal stuff. And she has no plans to leave: “I have the best job that I have ever had and will ever have … I serve at the pleasure of the president ... I'll be there as long as he'll have me." Full video: http://politi.co/1i2Mczt Post-game debrief: http://politi.co/JJBM9J
FIRST LOOK: STUFF THAT WENT RIGHT IN 2013 — New Bloomberg Businessweek cover story for the year-end double issue, on newsstands Friday, features economics editor Peter Coy on 8.5 things that went right this year (the Fed taper is #8). Here are the top three: “1. Peace Breaks Out in D.C. — The biggest welcome surprise of 2013 was the uneasy year end cease-fire in Congress, which was impossible to predict a year ago; 2. Medical Bills: Just What The Doctor Ordered — Prices for health care rose just 1.1 percent in the third quarter of 2013 from a year earlier, the smallest increase since 1962;
“3. Women on the March — Janet Yellen, Mary Barra, Angela Merkel, Park Guen Hye, Kathleen Taylor, Chile’s female runoff presidential candidates… women everywhere continued to make impressive economic and political gains” Story: http://buswk.co/19dNN2L Cover image: http://bit.ly/1cSb3C0
THIS MORNING ON POLITICO PRO FINANCIAL SERVICES – Republicans are urging regulators to provide Volcker Rule relief to small and mid-sized banks [http://politico.pro/JEcr0h] … To learn more about Pro's subscriber-only coverage -- and to get Morning Money every day before 6 a.m. -- please contact Pro Services at (703) 341-4600 or [email protected].
** For the political junkies and history buffs on your list, check out the POLITICO Bookshelf gift guide http://politi.co/18XmjhP **
GOOD THURSDAY MORNING — Programming note: Only two more M.M.’s for 2013. We go dark Tues. Dec. 24th through Thurs. Jan. 2nd. I know it will be hard on all of us, but we will get through it together.
DRIVING THE DAY — White House looks to take back the offensive on Obamacare with state-by-state reports that “highlight the benefits … that have already been implemented … Treasury Secretary Jack Lew attends a meeting of the Financial Stability Oversight Board … Initial jobless claims at 8:30 a.m. expected to dip to 334K from 368K … Index of leading indicators at 10:00 a.m. expected to rise 0.7% … Existing home sales at 10:00 a.m. expected to dip to 5.02M from 5.12M …
MURRAY BACKING OFF HER OWN BUDGET? — POLITICO’s Austin Wright: “Sen. Patty Murray is distancing herself from a cut in military pensions in the budget deal she brokered with Rep. Paul Ryan. Her unease about a key element of her own deal, which passed the Senate on Wednesday and is now headed to President Barack Obama, comes amid a backlash from veterans groups and Senate defense … Murray’s response: The pension cut isn’t final. ‘We wrote this bill in a way that will allow two years before this change is implemented so that Democrats and Republicans can keep working to either improve this provision or find smarter savings elsewhere,’ she said on the Senate floor …
“Her stance provides a major opening for opponents of the cut to work to get it tossed out or replaced with alternate savings — an effort that could weaken the budget deal and force vulnerable senators to continue defending their support for an agreement that would provide sequester relief for federal agencies at the expense of veterans. … [Murray’s] also promising a ‘fix’ next year that would exempt all disabled veterans. And at least one person close to the issue is pointing a finger at Murray’s Republican counterpart, the chairman of the House Budget Committee.” http://bit.ly/1c2qMyd
TAPER FLY AROUND –
INVESTORS CHEER — WSJ’s E.S. Browning: “The stock market soared, a sign of investors' hope that a recovering economy will offset future Fed moves, permitting stocks to continue rising. The rally pushed the Dow Jones Industrial Average to its 45th record in 2013 and left the blue-chip index on the verge of something it hasn't seen in almost 14 years: a record in inflation-adjusted terms. … To hit an inflation-adjusted record the Dow needs to reach 16186.39, according to calculations by economics professor William Hausman at the College of William & Mary. ... Even bond markets, which have the most to lose, reacted mildly to the announcement. The yield of the 10-year Treasury note rose to 2.885% late Wednesday. That was up from 2.842% on Tuesday, but still well below the 3% level it reached in September.” http://on.wsj.com/JJMgGg
FED HEAVY ON THE CAVEATS — NYT’s Binyamin Appelbaum: “[T]he Fed sought to offset concerns that it was once again pulling back too soon by strengthening its plans to hold short-term interest rates near zero, which officials regard as a more powerful means of stimulating growth. … The Fed’s shift in policy, in effect, means it plans to do less now and more later.
“That is a result of a compromise that has been months in the making between a group of officials convinced that the economy needs more help, and a range of internal critics who regarded the bond-buying campaign as ineffective or dangerous. … Investors appeared to agree with Mr. Bernanke, defying predictions that stock prices would retreat along with the Fed’s pullback” http://nyti.ms/1i2Utn1
BERNANKE GETS HIS SYMBOLIC GESTURE — FT’s John Authers: “The Federal Reserve’s programme of quantitative easing, which it is now winding down, has been a momentous step into the unknown. But some rules of central banking never change. As ever, the words that accompanied its announcement on monetary policy matter far more than the substance of the policy behind it. Ben Bernanke has the symbolic gesture he wanted before he leaves … [T]he Fed has sent the signal it wanted — that the era of open-ended easy money is coming to an end, but only while promising that rates will stay historically low long past next year.” “ http://on.ft.com/1bRcegC
FED CHAIR HEADS INTO HISTORY — WP’s Neil Irwin: “When Ben Shalom Bernanke finishes his workday and walks out the doors of the Federal Reserve’s white marble building on Constitution Avenue for the last time on Jan. 31, he will also be walking into history. He has guided the nation’s economy — and its central bank — through as tumultuous a period as it has faced in its hundred years of history. He will leave behind an utterly transformed institution. And whatever happens in the decades to come, he will be one of the most important shapers of economic policy of the 21st century” http://wapo.st/1jjUoN7
ALSO FOR YOUR RADAR –
VIDEO CLICK — ICYMI, WH Council of Economic Advisors Chairman Jason Furman joined Third Way Resident Scholar Bill Schneider on Wednesday for a discussion on economic growth and the middle class. Video: http://cs.pn/1cBzX5k
REGULATORS MAY OFFER GUIDANCE ON VOLCKER — WSJ’s Ryan Tracy: “U.S. banking regulators are considering issuing guidance to address concerns about the Volcker rule's impact on some small and midsize banks … The new guidance, which is being considered barely a week after the voluminous rule's release, comes as concerns mount that banks will take a hit to their capital levels or earnings as a result of a provision that some analysts interpret as prohibiting firms from investing in collateralized-debt or collateralized-loan obligations.
“The regulatory guidance could give banks time to sort out how the new rules apply to them but may not lift the ban on those types of investments … However, regulators could explain the rule's exceptions to help banks understand whether their investments qualify for exemption or need to be shed. … Some banks have stakes in CDOs or CLOs — bundles of mortgages, corporate loans or other debt, which can be risky since the collateral backing the obligations is often of lower quality. A fact sheet for smaller banks, issued with the Volcker rule, says banks that bought into the bundles of loans, rather than organizing the investments themselves, will have to divest themselves of them as part of the rule's ban on certain types of risky activity. That could mean a write-down for some institutions just before a year-end accounting deadline” http://on.wsj.com/19TZFkW
SAC TRADER FOUND GUILTY — FT’s Kara Scannell: “A former top aide to SAC Capital’s founder was found guilty of insider trading … handing the US government another victory in its long-running crackdown on Wall Street corruption. After just a day of deliberations the jury convicted Michael Steinberg, a former SAC portfolio manager, of five counts of conspiracy and securities fraud for trading shares of Dell and Nvidia after learning confidential earnings results in 2008 and 2009 from his research analyst.
The verdict was slightly delayed after Steinberg appeared to faint before it was delivered, …
“The trades netted more than $1m in profits for SAC, the eponymous hedge fund founded by Steven Cohen. Mr Steinberg faces up to 20 years in prison. The US attorney’s office in Manhattan has not lost an insider trading case since its crackdown began in 2009. Mr Steinberg is the 77th person to be convicted of insider trading. The trial was the toughest test of insider trading yet for the government since its case rested largely on the testimony of Jon Horvath, the former SAC analyst who pleaded guilty in a deal with the government.” http://on.ft.com/1becFBt
** ‘Tis the season to gift a good book. For the political junkies and history buffs on your list, check out the POLITICO Bookshelf’s most notable books of 2013. http://politi.co/18XmjhP **