Implementing the Fed’s Facilities: Moving at Maximum Speed with Maximum Care

Daleep Singh, Executive VP of the NY Fed, discusses the current economic landscape and the Fed’s efforts to keep the American economy on track

Alain Van Loo, Chief Investment Officer of The Sharp Financial Group, moderated a discussion for Money Marketeers of New York University, a charitable organization providing scholarships for students who have an interest in economics and finance, of which he serves as President. The meeting’s esteemed guest was Daleep Singh, Executive Vice President of the Federal Reserve Bank of New York.

 In his presentation, Singh, who is also Head of the Markets Group, detailed the conditions leading to the COVID-19 crisis that triggered market volatility across asset classes.

Singh reviewed the context in which the Federal Reserve launched an unprecedented set of policy actions to break the damaging psychology that was taking hold. This series of both conventional and unconventional actions reflected a recognition that the current economic shock is qualitatively different than that of the financial crisis of 2008, without a culprit other than the virus itself.

He explained that, unconstrained by a diagnosis of who is to blame and considering the mounting downside risks, the speed and skill of the policy response was free to match the dimensions of the unfolding shock.

Finally, he described the Fed’s approach to implementing U.S. Treasury-backed emergency facilities (Commercial Paper Funding, Corporate Credit, and Municipal Liquidity) at a maximum speed but also with utmost care to stabilize the financial system and support the flow of credit to households, businesses, and state and local governments.

He also emphasized the importance of transparency in sustaining public confidence. For instance, the group proactively identifies and addresses conflicts of interest real or perceived for anyone working on these facilities’ personal investment guidelines. He explained that this is a process that will be refined as needed and rules will be clear on the gathering of market intelligence and handling sensitive information related to the facilities.

Singh concluded his thoughts by acknowledging that the ultimate barometer of success is accomplishing what his group set out to do in support of the American economy. “Good governance will require balancing loss protection with financial stability goals, which requires integration of our risk management team into the full lifecycle of the facilities from policy design to the eventual wind down. We've been entrusted with great responsibility to deploy large sums of public resources and we have an obligation to the public to be accountable for all of our actions,” he said.

Singh then addressed questions from a number of thoughtful audience members. To listen to this enlightening meeting in full, including the Q&A, a recording can be accessed here.

Disclosures

 Sharp Wealth Advisory, LLC d/b/a The Sharp Financial Group (“Sharp Financial”) is a registered investment advisor. Advisory services are only offered to clients or prospective clients where Sharp Wealth Advisory and its representatives are properly licensed or exempt from licensure. The information provided is for educational and informational purposes only and does not constitute investment advice and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell a security. It does not take into account any investor's particular investment objectives, strategies, tax status or investment horizon. You should consult your attorney or tax advisor. All information has been obtained from sources believed to be reliable, but its accuracy is not guaranteed. There is no representation or warranty as to the current accuracy, reliability or completeness of, nor liability for, decisions based on such information and it should not be relied on as such.