In a veiled jab at Peter Wallison, Federal Reserve Governor Randall Kroszner observes:
Contrary to the assertion of critics, the evidence does not support the view that the CRA contributed in any substantial way to the crisis in the subprime mortgage market…lending to lower-income individuals and communities has been nearly as profitable and performed similarly to other types of lending.
Overall economic activity weakened across all Federal Reserve districts since the last report
We are looking at an economy that is not only in a recession, but a recession that is deepening rapidly
—Former Fed Governor Lyle Gramley
We are in the middle of the worst quarter. Right now, we are looking for a pretty sharp decline in the fourth quarter, a little less sharp decline in the first quarter and then hopefully things will improve after that.
—St. Louis Fed President James Bullard
If you wait for the Robins, you’ll miss the spring
—Buffett
Stocks are cheap when valued within the context of a financed-based economy once dominated by leverage, cheap financing and even lower corporate tax rates. That world, however, is in our past not our future.
More regulation, lower leverage, higher taxes and a lack of entrepreneurial testosterone are what we must get used to — that and a government checkbook that allows for healing, but crowds the private sector into an awkward and less productive corner.
It is clearly not going to end in a few months. We would be lucky to get done with it in the middle of next year.
—Jeffrey Frankel, a member of the NBER committee and a professor at Harvard University
Recent economic evidence suggests that the pace of this downturn is accelerating
This sets the stage for the Federal Reserve to be more formal in its adoption of quantitative easing
—Vincent Reinhart, the Fed’s director of monetary affairs until last year
But right now we have a fundamental shortfall in private spending: consumers are rediscovering the virtues of saving at the same moment that businesses, burned by past excesses and hamstrung by the troubles of the financial system, are cutting back on investment. That gap will eventually close, but until it does, government spending must take up the slack. Otherwise, private investment, and the economy as a whole, will plunge even more.
—Krugman arguing for deficit spending in exigent circumstances and against the likes of Amity Schlaes
Although the near-term outlook for the economy is weak, a number of factors are likely over time to promote the return of solid gains in economic activity and employment in the context of low and stable inflation. Among those factors are the stimulus provided by monetary policy and possible fiscal actions, the eventual stabilization in housing markets as the correction runs its course, and the underlying strengths and recuperative powers of our economy. The time needed for economic recovery, however, will depend greatly on the pace at which financial and credit markets return to more-normal functioning.
—Bernanke, today
Sometimes you must go too far to see what would suffice
Wallace Stevens
Purchases of up to $100 billion in GSE direct obligations under the program will be conducted with the Federal Reserve’s primary dealers through a series of competitive auctions and will begin next week. Purchases of up to $500 billion in MBS will be conducted by asset managers selected via a competitive process with a goal of beginning these purchases before year-end. Purchases of both direct obligations and MBS are expected to take place over several quarters. Further information regarding the operational details of this program will be provided after consultation with market participants.
We’ve got a big downdraft coming on. The recession is certainly looking longer and deeper. It’s just getting very tough for consumers.
—John Silvia, chief economist at Wachovia
We’re in for a pretty serious recession
—Jeffrey Frankel, a member of the business-cycle dating committee of NBER (11/12)
R-O-B-O-T
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