Nov 212017
Bill Longbrake

Bill Longbrake

As prospects rise for significant tax reform legislation to be enacted and take effect at the beginning of 2018, this stimulus boost is likely to extend the current expansion and push off the timing of the next recession. But, because the stimulus is coming during the mature phase of the cycle when the economy is already at full employment, it raises the risks of overheating and a potentially tighter monetary policy down the road. Amplifying the business cycle at this point in time is not optimal economic policy. But it is politically necessary for Republicans to deliver at least part of what they have promised to the American public. Bill Longbrake discusses prospects and risks in this month’s letter. He also describes significant policy developments coming out of the 19th Communist Party Congress that will shape China’s social and economic systems for years to come.

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Nov 142017

The Center for Financial Policy was honored to host FDIC Chairman Martin Gruenberg on November 3, 2017 in College Park for a talk to faculty and students on the financial crisis and its aftermath.  

“I thought the ‘Thrift Crisis’ (1980-90 Savings and Loan Crisis) would be the most severe crisis I would encounter. It resulted in the failure of nearly a third of its industry and cost taxpayers nearly $140 billion to make good on the failed institutions,” he said. “But as it turned out it was a relatively a small hors d’oeuvre compared to what we went through in 2008 and 2009.” — Chairman Martin Gruenberg

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Nov 012017

This CFP blog post is the first in a series on Wall Street legend Henry Kaufman’s new book, Tectonic Shifts in Financial Markets (Palgrave Macmillan). Tectonic Shifts is the fourth book by Dr. Kaufman, who spent most of his career in senior management at Salomon Brothers overseeing the firm’s premier fixed income research organization.

Kaufman was an early Fed watcher, and has much to say about the central bank’s successes and foibles since the Second World War. “Ironically,” he observes, “the Federal Reserve has vaulted itself into a position of high prominence not because of its achievements but because of its shortcomings.” The Fed’s key blind spot was its failure to take proper account of dramatic structural changes in financial markets when formulating monetary policy – from the rise of spread banking, to burgeoning securitization, to financial concentration, to the rapid growth of off-balance-sheet transactions and debt, the latter growing at a much greater rate than GDP. Piecemeal financial deregulation (such as the seemingly innocuous phase-out of Regulation Q) left financial markets more vulnerable to crisis and in some ways less competitive.

The 2008 debacle only accelerated financial concentration, Kaufman laments. “As a consequence, monetary policy is increasingly guided by the actions of our financial markets. Large financial conglomerates that are now too-big-to-fail have become financial public utilities, but other institutions will be allowed to fail. That will further increase financial concentration and intensify political scrutiny of monetary policy.” And we should all be concerned about a politicized Federal Reserve.

David B. Sicilia is Henry Kaufman Associate Professor of Financial History and a CFP Academic Thought Leader.

Oct 252017

The CFP and CFA Institute are hosting a conference on the active versus passive investment management debate in Washington, DC on Wednesday, November 1, 2017.   Fee $25.  Lunch will be served.

Details about the event can be found below along with the Director of the Center for Financial Policy, Russ Wermers, latest paper in this area:

We hope you can join us!


Event & Registration Details:


You can find all of Professor Wermers’ papers here:

Oct 172017
Bill Longbrake

Bill Longbrake

Investor, business and consumer optimism has not been fazed in the least by a multiplicity of mega disasters and political drama in Washington, D.C. Stocks reach new highs nearly daily; price volatility is a distant memory; interest rates refuse to rise; credit spreads are tight and getting tighter; inflation is wilting. In this month’s letter, Bill Longbrake observes that we have seen this movie before – indeed many times. When optimism prevails and there is ample liquidity, financial markets turn giddy. Times, such as the one the global economy finds itself in currently, occur when the economic cycle is mature. They are fueled by copious amounts of liquidity curtesy of central banks. For a while, sometimes for a very long while, these goldilocks moments go on and on sustained by optimism-driven positive feedbacks. But, ultimately, they end either in the soft landing the Fed is trying to engineer or a hard landing. Enjoy the moment but prepare for more difficult times!

Read the full letter