Operating at the Intersection of Technology and the Capital Markets
Tag: moral hazard
Nobody overdoes it like the Fed, except maybe the fiscal side of Government. Not only does the Bank Term Funding Program (BTFP) make bank collateral owned as of March 12th whole, the BTFP has a more attractive rate (at today's rate), compared to the Fed's discount window. When a bank borrows from the Fed's discount … Continue reading Expect Banks To Borrow Heavily from BTFP
If it was not clear in our recent piece Bail Out, I am not a fan of bail outs. Sunday's Fed action was a bail out, plain and simple. So much for Capitalism. Since 2009 the Fed has done as much to damage Capitalism as FDR's New Deal, Nixon's taking the U.S. off of the … Continue reading Fed Bail Out Creates Enormous Moral Hazard
If the U.S. was to experience a widespread bank run, that would be the time for the Federal Reserve to expand the money supply, thereby providing liquidity to commercial banks such that they may meet depositor withdrawals. Thus far SVIB and SBNY have been closed by the FDIC. Apparently that was too much for Fed … Continue reading Bail Out
The labor force participation rate has declined steadily for 20-plus years. There is no great mystery as to why. Government social benefits (i.e. welfare payments), to Americans have grown dramatically. The green line in the chart below is the Labor Force Participation Rate. The red line plots Government social benefits. The two big red spikes … Continue reading The Labor Problem
The Federal Reserve Bank of Atlanta estimates Real GDP for Q3 at 1.4%. That is likely an optimistic outlook and 1% growth is certainly nothing to write home about. Get used to it however as Real GDP in the -1% to 1% range is likely our future for the next decade or two given elevated … Continue reading Prices Up, Personal Consumption Down
A byproduct of the Pandemic Emergency Unemployment Compensation (“PEUC”) program is the job interview "no show", which has become all too common across the Retail sector. The "no show" is where a job candidate skips the job interview because the candidate never intended to obtain a job. Rather, the candidate simply needed to show proof … Continue reading The Job Interview “No Show”
Low wage services jobs are difficult to fill as we recently wrote (we continue to collect anecdotal data that supports our prior writing). Workers are choosing to stay home and collect Federal unemployment benefits rather than be productive. The moral hazard we warned of months ago is here. Should Biden and The Fed choose to … Continue reading Workers Choose To Collect Federal Unemployment Benefits Rather Than Work
We reviewed the 592 page Biden COVID Relief / Stimulus bill which recently became law. Our breakdown includes the nine primary spend categories and related subcategories as presented in the bill. Needless to say this is a massive debt-funded fiscal spending program at a time when Debt to GDP is at a record level. The … Continue reading A Breakdown of Biden’s Debt-Funded COVID Relief Program
The airlines knowingly placed themselves between a rock and a hard place when they decided to gorge on cheap debt for the purpose of funding share buyback plans designed to boost executive compensation. The lack of financial wiggle room is of their own doing. It's time for the airlines to restructure, to shrink capacity to … Continue reading Poor Executive Management Must Be Held Accountable
Check out our podcast on the topic at the SoundCloud link below. Look for the TEK2day Podcast on Apple, Spotify, Stitcher and Google Podcasts. https://soundcloud.com/ceorater/ep-371-moral-hazard-is-infecting-the-capital-markets
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