Morning Report: Neel Kashkari endorses “higher for longer”

Posted on February 6, 2024 by Brent Nyitray

Vital Statistics:

Stocks are higher this morning as global equities rally. Bonds and MBS are up small.

Minneapolis Fed President Neel Kashkari wrote an essay on monetary policy. In it, he discusses how tight monetary policy currently is and how to measure that tightness. He addresses the argument that monetary policy is getting tighter because the Fed Funds rate is stable in the context of falling inflation. If inflation has fallen by 3% over the past year, that implies the real Fed Funds rate has increased by about 3.6%.

He believes that is one way to look at the issue, however he prefers to look at the yield on the 10 year TIPS – or inflation-protected securities. Under this model, real rates have risen about only 60 basis points. Since the economy has remained so resilient, he considers whether monetary policy is as tight as the first model suggests. “The implication of this is that, I believe, it gives the FOMC time to assess upcoming economic data before starting to lower the federal funds rate, with less risk that too-tight policy is going to derail the economic recovery.”

This is one vote for the higher-for-longer outlook.

The ICE Mortgage Monitor sees improvement in the housing market from late 2023: “Prospective homebuyers may feel an all-too-familiar sense of dread upon hearing that prices – already at record highs – rose another 5.6% in 2023 according to our ICE Home Price Index,” Walden said. “As always, the truth of the situation is more nuanced than one simple, backward-looking metric might suggest, and the data holds some encouraging signals for these folks. In recent months, we’ve seen improvement in rates, affordability, and for sale inventory, with monthly home price growth moderating on a seasonally adjusted basis. While we are still out of sync with historical norms on multiple fronts, each of those metrics have at least been moving in the right direction.”

New York Community Bank continues to get pummeled in the wake of its fourth quarter miss and dividend cut. The Financial Times reported that the bank’s head of risk left the company earlier this year and it wasn’t disclosed to the market. Apparently the acquisition of Flagstar gave the OCC veto power over dividend payouts and after tense discussions, NYCB cut the dividend.

NYCB is taking some losses on an office property and is also exposed to a lot of multi-family risk that is a feature of rent-controlled New York City landscape. Apparently a lot of developers bought fixer-upper rent controlled apartments with the intention of raising the rent after the renovations. The city changed the rules during COVID and the aftermath, which means a lot of these multi-family properties are struggling with the developer (and the bank) left holding the bag. NYCB was highly active in Brooklyn multi-fam and it looks like losses are coming down the pike on some of these loans.

Filed under: Economy |

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26 Responses

  1. Brent Nyitray's avatar
    Brent Nyitray, on February 6, 2024 at 12:59 pm said:

    Left-Twitter is hopping mad about this immigration bill.

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    • Let the mutherfuker burn!'s avatar
      Let the mutherfuker burn!, on February 6, 2024 at 2:17 pm said:

      Considering what a gift it was to them, they should be.

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      • Brent Nyitray's avatar
        Brent Nyitray, on February 6, 2024 at 2:36 pm said:

        The fact that no Republicans are defending it says it all.

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        • jnc4p's avatar
          jnc4p, on February 6, 2024 at 2:39 pm said:

          My read of it is that it’s potentially better than the status quo, but doesn’t go far enough.

          And there’s no reason to expect that the Biden administration will actually change it’s policies even if they have additional enforcement and border security abilities codified in the law.

          Scott did a good job of showing how a lot of the current situation is driven by executive branch policy choices.

          However, the additional enforcement authority in the bill could be used by the Trump administration more aggressively.

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        • Let the mutherfuker burn!'s avatar
          Let the mutherfuker burn!, on February 6, 2024 at 2:41 pm said:

          Elected Republicans are breathtakingly pathetic.

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  2. jnc4p's avatar
    jnc4p, on February 6, 2024 at 2:36 pm said:

    This should be good:

    “Tucker on His Upcoming Interview with Putin”

    https://sashastone.substack.com/p/tucker-on-his-upcoming-interview

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  7. jnc4p's avatar
    jnc4p, on February 7, 2024 at 4:35 pm said:

    Yes, the monitoring regime is almost complete:

    “Financial Big Brother is Watching You
    A brief note on an overlooked nightmare.

    Matt Taibbi
    Feb 7, 2024

    …

    The highlighted portion shows how algorithmic analysis works in financial surveillance. First compile a list of naughty behaviors, in the form of MCC codes for guns, sporting goods, and pawn shops. Then, create rules: $2,500 worth of transactions in the forbidden codes, or a number showing that more than 50% of the customer’s transactions are the wrong kind, might trigger a response. The Committee wasn’t able to specify what the responses were in this instance, but from previous experience covering anti-money-laundering (AML) techniques at banks like HSBC, a good guess would be generation of something like Suspicious Activity Reports, which can lead to a customer being debanked.”

    https://www.racket.news/p/financial-big-brother-is-watching

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  8. Let the mutherfuker burn!'s avatar
    Let the mutherfuker burn!, on February 7, 2024 at 6:37 pm said:

    Goddamnit! I do not want to agree with Saira Rao that celebrities should be cancelled!

    https://x.com/sairasameerarao/status/1755234743996629384?s=46&t=vSGsUlnc4rLxcUf7zfUiHg

    fuck!

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  9. jnc4p's avatar
    jnc4p, on February 8, 2024 at 9:52 am said:

    No link included

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  10. ScottC's avatar
    ScottC, on February 8, 2024 at 11:20 am said:

    Taibbi has been listening to arguments before SCOTUS regarding Colorado’s removal of Trump from the ballot.

    https://www.racket.news/p/trumps-ballot-access-case-on-trial?utm_source=post-email-title&publication_id=1042&post_id=141494266&utm_campaign=email-post-title&isFreemail=false&r=ixww3&utm_medium=email

    I’ve been listening too, and I disagree with his take. 

    Trump’s attorney, Jonathon Mitchell, did face some difficult questions, including the one Taibbi highlights, but I thought he handled them all pretty smoothly. I would not have characterized him as “swimming upstream”. Indeed, even Judge Jackson, whose interaction Taibbi spoke about, closed out by raising arguments that actually helps Trump’s case, and expressed surprise that Mitchell hadn’t made those arguments himself.

    Taibbi did highlight the worst moment for the opposing attorney, Jason Murray, but he says that he “managed to climb out of the death-pit a few minutes later”, characterizing it as a “10-8 round”. Again, I wouldn’t characterize it that way at all. In fact Gorsuch pretty much caught him out on a blatant contradiction in his position, and was relentless in challenging it as Murray repeatedly kept trying to dodge it by answering any question other than the one Gorsuch was posing. The only reason Murray got out of the death-pit was because Gorsuch stopped holding him down. Far from a 10-8 round, it seemed to me more like a pin for Gorsuch.

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    • jnc4p's avatar
      jnc4p, on February 8, 2024 at 4:13 pm said:

      I think the stronger arguments are made in the amicus curiae briefs that I’ve seen so far, but I don’t bother to listen to oral arguments because I think they are mostly irrelevant in terms of persuading the court. They have slightly more relevant in terms of revealing what the justices may already think.

      Edit: Scott have you read Barr’s brief?

      Summation:

      In the seminal case of In re Griffin, Chase, acting as presiding judge for the circuit court in the District of Virginia, rejected a defendant’s claim that his conviction was void because it had been entered by a judge who had been a Confederate official and thus disqualified from holding judicial office. Chase ruled that Section Three of the Fourteenth Amendment is not self-executing. That is, it cannot be enforced unless and until Congress enacts legislation that sets up an enforcement mechanism. And Congress, in 1869, had not implemented any such enforcement procedure. In other words, Congress—not the states—gets to decide how individuals are disqualified from office under the Fourteenth Amendment.

      In fact, Congress did decide. It did so the year after Justice Chase’s decision when Congress enacted the Enforcement Act of 1870. That law contained two provisions for the expressed purpose of enforcing Section Three. One provision set up a mechanism by which federal attorneys could bring a civil action to remove from office a person alleged to be disqualified for engaging in insurrection or rebellion. (This provision was repealed in 1948.) The second provision authorized criminal prosecution of someone for knowingly accepting or holding office in violation of Section Three. This provision has evolved into Section 2383 in the current criminal code, which makes it a crime to engage in rebellion or insurrection against the United States and disqualifies anyone who does from holding federal office.  

      The point is that in present-day America, under existing law, the only way to disqualify someone under Section Three is through criminal prosecution under Section 2383. The federal government, which has painstakingly examined the events of January 6, has not charged President Trump with insurrection or even incitement. 

      https://www.thefp.com/p/bill-barr-banning-trump-from-the

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    • jnc4p's avatar
      jnc4p, on February 8, 2024 at 4:15 pm said:

      This was a great observation about the press though:

      Every day for nearly nine years now, it’s been the same redundant passages in quantity, the same devotional rituals, no different from the ceremonially slaughtered pigs or goats nervous aristocrats used to offer up in classical times. I’m convinced most pundits and even most senior Democrats know by now that these endless lawsuits (with accompanying Trump-as-Antichrist press bleatings) cut against them politically, but because the cause is religious rather than strategic, they’re not able to stop. The cause will take them where it takes them, beginning with this current clash with the Supreme Court, which I’d guess won’t uphold the Colorado Supreme Court decision, but weirder things have happened of late.

      https://www.racket.news/p/trumps-ballot-access-case-on-trial

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  12. jnc4p's avatar
    jnc4p, on February 8, 2024 at 4:24 pm said:

    The Babylon Bee had the perfect take on the Nevada Primary results:

    “Libertarians Nominate Hot New Candidate ‘None Of These’
    Politics · Feb 7, 2024 · BabylonBee.com “

    https://babylonbee.com/news/libertarians-nominate-hot-new-candidate-none-of-these

    With the campaign swag shirts to match:

    https://shop.babylonbee.com/products/none-of-these-candidates-t-shirt

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  13. jnc4p's avatar
    jnc4p, on February 8, 2024 at 6:28 pm said:

    The Tucker Carlson interview with Putin:

    https://tuckercarlson.com/the-vladimir-putin-interview/

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  15. jnc4p's avatar
    jnc4p, on February 8, 2024 at 7:05 pm said:

    Biden is melting down on live TV. The Taibbi live stream commentary is crazy.

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    • Let the mutherfuker burn!'s avatar
      Let the mutherfuker burn!, on February 8, 2024 at 8:48 pm said:

      I guess he wanted to march out there and show the world that Hur was right.

      Seems weird that the Biden team is giving legs to the report. It’s no coincidence it was released today, when SCOTUS heard oral arguments re CO ballot access. They should just shut up and deprive it of air, the media doesn’t like the story anyway.

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  16. jnc4p's avatar
    jnc4p, on February 8, 2024 at 11:23 pm said:

    Finally got a concise explanation of why Nevada had a primary and a caucus:

    Nevada voters had selected its presidential nominees for decades by attending the caucuses held by their respective parties. But after the 2020 elections, Democratic lawmakers pushed to hold a statewide primary and forgo the caucuses, which often drew low turnout and were largely controlled by party activists. Over the objections of Republicans, Democratic state lawmakers passed a 2021 law guaranteeing that every state voter would receive a primary ballot in the mail, as well as options to vote in person or at a drop box.

    The state’s Republican leaders sued the state — arguing that Democratic lawmakers could not determine their process for choosing delegates — and won the right to award delegates through their caucus process. The conflict resulted in the confusing situation this week in which GOP voters were able to cast a ballot in Tuesday’s state-run primary but will decide which candidate should get the 26 delegates in the separate Republican Party-run caucuses on Thursday night.

    https://www.washingtonpost.com/elections/2024/02/08/trump-nevada-caucuses/

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