Summers vs Yellen

Wall Street is looking for men

For the mantle of leadership when,

As the President knows,

He'll have to propose

A successor to Fed Chairman Ben. 

It's increasingly frequently said

By economists very well read

That Obama may stiff

The recovery if

He picks the wrong head of the Fed. 

Dr. Yellen's CV is the nicest

To manage employment and prices

From the days when she ran

The Fed bank in San

Francisco and warned of the Crisis. 

Dr. Summers has those who would vote 'im

'Cause his "gravitas" serves to promote 'im,

While other folks showed 

That's really a code

For the candidate having a scrotum. 

Whatever your partisan views

On the better of qualified Jews,

It's the President's pick

And we'll know pretty quick

The mensch that Obama may choose. 

Wanted: Higher Prices

The Federal Reserve is awaiting
That prices may start re-inflating,
So they can foresee
Unwinding QE,
Whose tapering they've been debating.

The Fed will not bother to taper

Its purchase of Treasury paper

'Til the jobless rate now

And inflation allow

An end to their stimulus caper. 

Bernanke must act with agility

To avoid causing stock volatility

'Til he can discern

A sustainable turn

To price and employment stability. 

The market's attention to rates of unemployment and inflation, always close under any circumstances, is especially intense now that the Fed has let it be known that the tapering of their quantitative easing program depends on these factors. Chairman Ben Bernanke and his fellow board members have said that they could begin to reduce the Fed's $85 billion-a-month purchases if mortgage and Treasury bonds once the jobless rate - now 7.6% - falls to 6.5%, and inflation has stabilized around the 2% target rate. 

In the last twelve months of tepid economic growth, inflation has been closer to 1%, raising fears of possible deflation, while the fall in the jobless rate has been painfully slow. However, the latest monthly inflation reading, revealed yesterday, shows June prices up 1.8% over the previous June, which some are taking as a hopeful sign. Prices can be volatile though, so one should be careful not to read too much into one month's data. 

Over the next two days, Chairman Bernanke will testify to Congress, who will no doubt press for definitive word on the economic outlook and the Fed's likely actions. 

Fabulous Fab

Ex-Goldmanite Fabulous Fab,

With his gift of remarkable gab,

Is caught in a hitch

By the SEC, which

Will take anyone it can grab.

He told an impeachable tale

In a colorf'ly worded email

Of misgivings and doubt,

Which the Feds have smoked out

Of his rashly electronic trail. 

The lesson, on Wall Street (and Main),

Is most unimpeachably plain:

When engaged in deceit,

Then please be discreet, 

Lest your words come to haunt you again. 

Former Goldman Sachs banker Fabrice Tourre finds himself on trial in a Manhattan federal court this week, six years after he helped to put together a synthetic CDO that yielded big losses for the institutions that bought it. Investors in Abacus 2007-AC1, as the Goldman CDO was officially called, were not informed that the deal had actually been structured as a vehicle to allow hedge fund manager John Paulson to go short on the subprime mortgage market, which he correctly believed would fall. Mr. Tourre harbored similar doubts, which he confessed only in an email to his girlfriend: "The whole building is about to collapse anytime now... The only potential survivor, the fabulous Fab," adding that, in truth, he did not feel so fabulous. Mr. Tourre's former employer has paid a half-billion dollar fine without admitting wrongdoing, leaving only one indiscreet foot soldier to bear the personal responsibility for its role in the mortgage crisis. 

Please, Sir: Ease, Sir!

The market's resounding with pleas
From New York to the Brits and Chinese
For a positive trend,

By which they depend

On the Fed to continue to ease. 

For the Index to keep hitting highs,

It's important to all of those guys

In the trading salons,

As they're dealing in bonds, 

That the Fed Open Market Desk buys. 

Investors have reason to sob less

And fear for their balance at Schwab less

If the Fed will agree

To stick with QE

'Til there's 6 1/2% jobless. 

Around the world, stocks have surged to new highs following Federal Reserve Chairman Ben Bernanke's assurances of further monetary stimulus. On Wednesday, speaking at a conference organized by the National Bureau of Economic Research, Bernanke observed that "you can only conclude that highly accommodative monetary policy for the foreseeable future is what's needed in the US economy." These words gave a shot of comfort to global markets that, for the last two months, had been obsessed with the timing of eventual "tapering". 

The resulting Wednesday afternoon rally in US equities carried through to Thursday morning in Frankfurt, Paris and London, before caroming back to New York for a second day. The S&P 500 has now reached a new record, and the Dow Jones Industrial Average may soon follow suit. 

* * *

On a side note, I am happy to resume this little hobby of economic verses, following a two-month hiatus in which I found and adjusted to a demanding new job. Thanks to all those who enquired after my welfare during that time, and who expressed their desire for the return of Limericks Économiques. I hope they don't disappoint.