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News
Cheap Costs Push Use of Fed Term Funding Tool to Fresh Record
Banks borrowed a record amount from the Federal Reserve’s newest backstop facility in the most recent week as wagers on interest-rate cuts continue to make it a more attractive choice. Data from the Fed showed a record high $141 billion in borrowing from the Bank Term Funding Program, or BTFP, in the week through Jan. 3. That compares to a previous all-time high of $136 billion, reached in the week ended Dec. 27. Launched amid last year’s banking crisis, the BTFP allows banks and credit unions to borrow funds for up to one year, pledging US Treasuries and agency debt as collateral valued at par. The rate for these advances will be the one-year overnight index swap rate plus 10 basis points. The facility is set to expire in March, though Fed policymakers have yet to comment as to whether it will be extended.
St. Louis Fed names former Tudor executive Alberto Musalem as new president
Economist Alberto Musalem was named the next president and CEO of the Federal Reserve Bank of St. Louis on Thursday. Musalem, 55, will start on April 2. He succeeds James Bullard, who joined Purdue University last August. The St. Louis Fed representative is an alternate member of the rate-setting Federal Open Market Committee and will vote in 2025. St. Louis Fed First Vice President Kathy O’Neill has been holding the position in the interim. “Alberto will be an outstanding president and CEO of the St. Louis Fed,” said St. Louis Fed director Carolyn Chism Hardy, president and CEO of Chism Hardy Investments and deputy chair of the bank’s search committee.
Calstrs Seeks to Borrow More Than $30 Billion to Manage Cash
The California State Teachers’ Retirement System, the country’s second-largest pension fund, may borrow more than $30 billion to help it maintain liquidity without having to sell assets at fire-sale prices, according to a new policy its investment committee will consider this month. If approved, the policy will allow staff to borrow as much as 10% of the roughly $318 billion portfolio. The proposal calls for leverage to be used “on a temporary basis to fulfill cash flow needs in circumstances when it is disadvantageous to sell assets,” a Calstrs policy document said. Calstrs board members will review a first draft of the policy at its Jan. 11 meeting. A representative for the pension declined to comment.
Why More Secession Means Lower Taxes and More Trade
When we hear of political movements in favor of decentralization and secession, the word “nationalist” is often used to describe them. We have seen the word used in both the Scottish and Catalonian secession movements, and in the case of Brexit. Often the term is intended to be pejorative. When used pejoratively—as by the critics of Brexit—the implication is that the separatists seek to exit a larger political entity for the purposes of increasing isolation, throwing up greater barriers to trade, and pursuing a more autarkic economic policy. In other words, we’re supposed to believe that efforts at decentralizing political systems leads to states becoming more oppressive and more protectionist.