The Federal Reserve Bank of St. Louis FRED database, the premier source for free U.S. financial data, now includes data of the Federal Reserve System’s weekly balance sheet back to the Fed’s beginning in 1914. The data come from a paper and data set I compiled with five students of CFS Special Counselor Steve Hanke.
The students — Cecilia Bao, Andrew Chen, Nicholas Fries, Justin Gibson, and Emma Paine — were undergraduates who have all since graduated from Johns Hopkins University. As part of their work for Hanke’s course Research in Applied Economics, they wrote papers dividing the Fed’s history into three periods, with each paper using the corresponding data. I served as an adviser and outside reader. We then combined the data into one big data set.
Previously, some monthly balance sheet data from the Fed’s early years were digitized, along with full data from recent years. Full weekly data from the beginning, integrated with recent data, were however unavailable in any readily usable form. The students put in many hours digitizing the data, a task that any of thousands of professional economists could have done over the last 30 or even 50 years but none were enterprising enough to do.
Here is the announcement from FRED about the data set and here are the data series. For the original papers, see Chen and Gibson, Bao and Paine, Fries, and our joint paper. For the data from the joint paper, see here.
The Society of Economic Measurement’s (SEM) 2019 conference will be held at Goethe University in Frankfurt with cosponsorship by the European Central Bank (ECB) on August 16-18, 2019.
The Call for Papers deadline for submissions is April 1, 2019.
- Richard Blundell, University College London
- Erwin Diewert, University of British Columbia
- Arthur Lewbel, Boston College
- Helmut Lütkepohl, Free University of Berlin
- Kjetil Storesletten, University of Oslo
- Apostolos Serletis, University of Calgary, Presidential Address
Local Organizing Committee:
- Michael Kosfeld, Goethe University Frankfurt (Chair)
- Ester Faia, Goethe University Frankfurt
- Francis Gross, European Central Bank
- Florian Hett, Johannes Gutenberg University Mainz
- Loriana Pelizzon, Goethe University Frankfurt
- Stephen Spear, Carnegie Mellon University
- Apostolos Serletis, University of Calgary
Conference Maker is now ready to accept submissions. You can find the Conference Maker site for the Frankfurt conference here:
The deadline for submission of invited and contributed papers is April 1 (no extension), with decisions to be announced by May 1.
Invited Sessions: If you are organizer of an invited session, the information on the four papers invited for your session must be entered into Conference Maker before the April 1 deadline. There are three ways you can do that:
(a) You can enter the information about the four speakers and their papers into Conference Maker yourself.
(b) You can have your four authors enter the information into Conference Maker themselves.
(c) You can provide the information by email to Kristin Scheyer and request her to enter it into Conference Maker for you. Kristen’s email address is: SEMconferences@outlook.com
Contributed Sessions: If you would like to submit a contributed paper, please submit to Conference Maker and choose a Contributed Session Organizer whose area of expertise is a good match for the topic of your paper.
If you have questions about the use of Conference Maker, please contact Kristin Scheyer at SEMconferences@outlook.com or Steve Spear at firstname.lastname@example.org
With best wishes to the new SEM President – Apostolos Serletis – and congratulations to William A. Barnett for his leadership in founding the SEM and serving as the Society’s first President.
The Bank of the United States was the closest the United States came to having a central bank before establishing the Federal Reserve System. What was later called the First Bank of the United States operated from 1791 until its charter lapsed in 1811. The bank established a nationwide network of branches to help the federal government, its largest customer, transfer funds across the country. It was the only U.S. bank with a nationwide branch network until the 1990s. After bad experience without a national bank during the War of 1812, the federal government chartered what was termed the Second Bank of the United States in 1816. When its charter lapsed in 1836, the bank continued as the United States Bank of Pennsylvania, which failed in 1841 following recessions and financial panics. In all of its incarnations, its headquarters was in Philadelphia and it was the largest bank in the United States.
With three former students of CFS Special Counselor Steve Hanke, I have gathered the balance sheets of the Bank of the United States into a working paper and accompanying spreadsheet file that should be useful for anyone interested in the quantitative study of the financial system during the early years of the Republic. Adil Javat gathered data for the First Bank of the United States, George Gulino gathered data for the Second Bank, and Zackary Baker gathered data for the U.S. Bank of Pennsylvania. Javat and Baker previously published their data and analysis in working papers for Hanke’s Institute for Applied Economics, Global Health, and the Study of Business Enterprise. I filled in a number of holes that remained in their data. The joint working paper is a data paper only, with no analysis. (Here is the link to the whole working paper series: Javat’s paper is no. 74, Baker’s paper is no. 101, and the joint paper is no. 132. Gulino’s paper is unpublished.)
I see two lines of follow-on research that could be worthwhile for somebody else to do, since we lack the time and interest for them. One is to examine the relationships among the far-flung branches of the Second Bank and the U.S. Bank of Pennsylvania for clues about differences in regional financial development. Our paper digitizes the overall balance sheet for the Second Bank and the U.S. Bank of Pennsylvania, but the financial statements also show many important balance sheet items for individual branches, which we did not digitize. (Javat did digitize the branch data from the First Bank, which were far less extensive hence not unreasonably time-consuming for a student term paper.)
The second line of research concerns the liquidation of the U.S. Bank of Pennsylvania after it failed in 1841. The bankruptcy was possibly the largest ever in relation to the size of the U.S. economy. It lasted 15 years, at the end of which creditors were paid in full, though shareholders received nothing. There does not seem to be even any cursory scholarly summary of the bankruptcy proceedings. If adequate records exist, it could be a fascinating case study from the legal, economic, and possibly political angles alike. Nicholas Biddle, the sometime president of the Bank of the United States, destroyed many of its internal documents, but perhaps a trawl through court archives and newspapers will uncover records from which to write an informative account.
SEC Commissioner Hester M. Peirce described potential problems with expanding SEC financial disclosures requirements to include “soft issues,” such as environmental, social and governance (“ESG”) information. According to Ms. Peirce, “financial reporting loses its value when it is applied too broadly.”
In remarks before the 2018 Leet Business Law Symposium at Case Western Reserve University School of Law, Ms. Peirce argued that requiring companies to disclose information that does not relate to the long-term financial value of the company may harm shareholders. Ms. Peirce stated that the current federal securities laws have traditionally interpreted “material” disclosure as information that demonstrates the likelihood of a company providing a return on an investment. She pointed out that the more money a company spends on disclosures (which is a costly process), the less is available for shareholders.
Ms. Peirce also explained that the disclosure process was not designed to accommodate many “soft issues.” First, financial disclosures are intended to provide “material” information for the “reasonable” investor. According to Ms. Peirce, requiring companies to disclose information that “responds to interests unrelated to the investment’s profitability” (i.e., ESG issues) would make the term “material” meaningless. Second, Ms. Peirce contended that ESG issues are often not easily definable and the auditing process is not reliable. By way of example, Ms. Peirce pointed to the International Accounting Standards Board’s recently released framework, which focuses on the ill-defined term “stewardship.”
Lofchie Comment: Compare and contrast Commissioner Peirce’s skeptical statement on ESG disclosure with Commissioner Stein’s supportive statement (see also Cabinet commentary here). There are tremendous benefits to this open dialogue and the fact that the two Commissioners have clearly articulated opposing views.
Federal Reserve Board (“FRB”) Vice Chair for Supervision Randal K. Quarles considered proposed changes to the FRB’s large bank stress testing regime that would increase transparency and efficiency.
In a speech at the Brookings Institution, Mr. Quarles said that the FRB is seeking to improve the measurement of trading book-related risks, and that a “single market shock” approach in existing stress testing practice does not adequately capture risks in firms’ trading books. He said that the proposed changes “are not intended to alter materially the overall level of capital in the system or the stringency of the regime.”
Mr. Quarles discussed changes to the Comprehensive Capital Analysis Review (“CCAR”) indicating that the FRB will reconsider whether any part of the regulatory capital rule (the stress capital buffer or “SCB”) proposal will remain for the 2019 CCAR. He said that he intends to request that the FRB exempt firms with less than $250 billion in assets from the 2019 CCAR quantitative assessment and supervisory stress testing in light of the FRB’s recent tailoring proposal. In addition, Mr. Quarles expressed his support for “normaliz[ing] the CCAR qualitative assessment” by (i) removing the public objection tool and (ii) evaluating firms’ stress testing practices through “normal supervision.”
Mr. Quarles stated that elements of the proposal to integrate stress testing with the stress capital buffer will be amended after receiving public comment. As a result, the SCB, which was scheduled for the 2019 stress test cycle, will be delayed. Mr. Quarles said that the first SCB may go into effect after 2020.
The SEC will amend Regulation NMS Rules 600(b) and 606 to increase the transparency of broker-dealers’ “handling and routing of orders in NMS stock.” The amendments (i) will require a broker-dealer, upon request by a customer, to provide such customer with certain standardized disclosures related to the broker-dealer’s routing and execution of the customer’s “not held” orders for the previous six months, and (ii) revise the current quarterly public order-routing report to include additional disclosures regarding the terms of any payment for order flow and any profit-sharing arrangements that may influence a broker-dealer’s order-routing decision.
The amendments will become effective 60 days after their publication in the Federal Register. The compliance date will be 180 days following the date of publication of the amendments in the Federal Register.
Lofchie Comment: This requirement is in line with the SEC’s historical policy of requiring disclosure and then allowing investors to make their own investment and trading decisions based on that disclosure. Questions remain as to whether the disclosures are sufficient for customers to make informed decisions and whether the requirement of making the added disclosures may motivate broker-dealers to improve their execution practices.
The Federal Reserve Board (“FRB”) will implement a new supervisory rating system for large financial institutions.
Effective February 1, 2019, the FRB will enforce a new rating system for large financial institutions (“LFI”). The new system is intended to (i) better reflect current FRB supervisory programs and practices, (ii) enhance the supervisory assessments and communications of supervisory findings and implications and (iii) improve “transparency related to the supervisory consequences of a given rating.” The new LFI rating system will apply to (i) all domestic bank holding companies and non-insurance, non-commercial savings and loan holding companies (“SLHCs”) with $100 billion or more in total consolidated assets and (ii) U.S. intermediate holding companies of foreign banking organizations with $50 billion or more in total consolidated assets.
The existing RFI/C(D) rating system will continue to be applied to community and regional bank holding companies with less than $100 billion in consolidated assets. In addition, the RFI/C(D) rating system will be expanded to apply to certain SLHCs with less than $100 billion in total consolidated assets on February 1, 2019.
Johns Hopkins University professor and CFS special counselor, Steve Hanke wrote a superb piece on understanding money in Forbes.
He writes that “The Fed’s money supply measures are poor quality and misleading. For superior measures, go to the Center for Financial Stability in NYC, and use its Divisia M4 metric.” His piece stretches into important detail and reveals common misconceptions.
From my perspective, our monetary data have been exceedingly helpful at understanding the efficacy of Fed policy and wiggles in the US economy. Money and financial liability data are applicable for investment managers and economists of all stripes… Keynesians, monetarists, etc.
The full piece is available at … https://www.forbes.com/sites/stevehanke/2018/10/29/the-feds-misleading-money-supply-measures/
Registration for the upcoming CFTC Conference: “FinTech Forward 2018: Innovation, Regulation and Education” is now open. The conference, which is scheduled to take place from October 2, 2018 to October 4, 2018, will feature CFTC Chair Christopher J. Giancarlo and U.S. Representative Austin Scott (R-GA), among others.
The conference will focus on significant tech-driven developments in the financial markets. Participants will discuss (i) the impact that new technologies may have on markets and customers, and (ii) what regulators ought to do to help identify emerging opportunities, challenges and risks, as well as to better educate market participants.
Senator Elizabeth A. Warren unveiled a wide-ranging bill that seeks to “eliminate the influence of money in our federal government.”
The Anti-Corruption and Public Integrity Act would, among other things:
- ban “Members of Congress, cabinet secretaries, federal judges, and other senior government officials from owning and trading individual stocks”;
- institute a lifetime ban on former Member of Congress, Presidents and agency heads from lobbying;
- require conflicts of interest disclosures in rulemaking comments and studies;
- prevent certain individuals from the private sector from taking certain government positions, including, in some cases, running for office;
- livestream audio of federal appellate courts and promote diversity on the federal bench;
- create a new, independent anti-corruption agency to enforce federal ethics laws; and
- increase financial and tax information disclosures for elected officials and candidates for federal office.
Lofchie Comment: One effect of Senator Warren’s proposed prohibitions is that the government would be peopled by career government employees or academics. The unspoken theory behind this is that work for a private enterprise is corrupt, yet work for the government itself or in academics is not. This is a false premise. It is commonplace that those in government seek to use their power to bolster their ambitions of running for higher office. Their political or personal ambition does not disqualify them from office, nor should it disqualify them from having a voice. Likewise, those with experience working in private industry often have a good deal to contribute to the government, perhaps more in some cases than those who have worked only in government or academics.
Senator Warren’s bill would ban any individual who had worked for a company that had received any contract from a government agency for working for that agency for the next four years. She would also ban any senior officer of a company that has been the subject of any enforcement action (without regard to its severity) from serving in Congress (shouldn’t voters in each State get to decide whom they wish to elect?) or working in the Executive branch.
These and her other legislative proposals are, of course, political positioning ahead of a possible run for higher office. But they add to her record of discouraging the private sector from commenting on rules that concern them and discouraging those with industry experience from joining the government. See, e.g., Senator Warren Asks CFTC to Withdraw EEMAC Report on Position Limits; Senator Warren Questions ”Good Intentions” behind Study Challenging DOL’s Fiduciary Proposal; Senator Warren’s Study Finds “Dangerous Problem” with Non-Cash Compensations in Annuity Sales.