Photo: Stanford Graduate School of Business
Want to front-run the Fed? If you’re Obama’s favourite banker, Jamie Dimon, president of JP Morgan Chase, there’s no need to parse FOMC statements or obscure speeches by Fed governors.No need to analyse hundreds of Treasury securities to make an educated guess as to just which ones Brian Sack (of the NY Fed) will buy any given week. Even hiring expert networks staffed with ex-Fed officials is unnecessary.
No, if you’re Jamie Dimon, you go straight to the top and break bread with William Dudley, ex-Goldmanite president of the NY Fed. It just so happened that Dimon dined thrice with Dudley over the January 2009 to September 2010 period (plus one conference call), according to a document released by the NY Fed today.
And perhaps only coincidentally, these encounters all occurred surrounding major changes in announced Fed policy.
The first meeting took place on February 18, 2009, only weeks after Mr. Dudley’s ascension to the bank’s presidency on January 27, 2009.
06:30 PM – 08:00 PM HOLD for dinner with Jamie Dimon Location: TBD in midtown
Exactly one month later, on March 18, 2009, the Federal Open Market Committee, under Chairman Bernanke’s aegis, announced:
To provide greater support to mortgage lending and housing markets, the Committee decided today to increase the size of the Federal Reserve’s balance sheet further by purchasing up to an additional $750 billion of agency mortgage-backed securities, bringing its total purchases of these securities to up to $1.25 trillion this year, and to increase its purchases of agency debt this year by up to $100 billion to a total of up to $200 billion. Moreover, to help improve conditions in private credit markets, the Committee decided to purchase up to $300 billion of longer-term Treasury securities over the next six months.
This was the first round of quantitative easing (so-called QE1), which would eventually become a $1.75 trillion bank largess program. Wouldn’t it have been helpful to speak with the NY Fed’s top official (who, incidentally, was previously in charge of the Fed’s buying and selling)? Or even get in on the decision making?
The second meeting was on April 22, 2009, just shy of one month after the commencement of large scale Treasury purchases. As it’s purpose [putatively] was only to see how the front runnin’s been going, it was merely a telephone call:
09:00 AM – 09:15 AM Conference Call with Bill Dudley and Jamie Dimon, JPMorgan Chase Location : Bill Dudley’s Office
The third official meeting was once again more intimate and took place on January 25, 2010, two days before the FOMC would announce the exact date when the MBS and Agency purchases would terminate:
07:30 AM – 08:30 AM Breakfast with Jamie Dimon, JPMorgan Chase Location : 270 Park Avenue 49th Floor Dining Room (Stop off at Reception Area, then proceed to 49th Floor)
That January 27, 2010 FOMC announcement also signaled the termination of most of the lending programs the Fed had initiated in the wake of the Lehman collapse:
In light of improved functioning of financial markets, the Federal Reserve will be closing the Asset-Backed Commercial Paper Money Market Mutual Fund Liquidity Facility, the Commercial Paper Funding Facility, the Primary Dealer Credit Facility, and the Term Securities Lending Facility on February 1, as previously announced. In addition, the temporary liquidity swap arrangements between the Federal Reserve and other central banks will expire on February 1. The Federal Reserve is in the process of winding down its Term Auction Facility: $50 billion in 28-day credit will be offered on February 8 and $25 billion in 28-day credit will be offered at the final auction on March 8. The anticipated expiration dates for the Term Asset-Backed Securities Loan Facility remain set at June 30 for loans backed by new-issue commercial mortgage-backed securities and March 31 for loans backed by all other types of collateral. The Federal Reserve is prepared to modify these plans if necessary to support financial stability and economic growth.
Thanks for the heads up Dudley! [Who, buy the way, is a permanent voting member of the FOMC by virtue of being president of the NY Fed.]
The next meeting between the two would be on July 14, 2010:
08:00 AM – 09:00 AM Breakfast with Jamie Dimon, JPMC Location : PCR, 10th floor
This was nearly four full weeks ahead of the pivotal August 10, 2010 FOMC meeting, wherein the resumption of Treasury purchases was announced (so-called QE Lite):
To help support the economic recovery in a context of price stability, the Committee will keep constant the Federal Reserve’s holdings of securities at their current level by reinvesting principal payments from agency debt and agency mortgage-backed securities in longer-term Treasury securities.1 The Committee will continue to roll over the Federal Reserve’s holdings of Treasury securities as they mature.
The calendar curiously stops in September, 2010, but we’d be willing to bet crumpets to crustaceans there was an intimate dinner (or breakfast) date between the two cozy bank presidents in early October. This would be about a month’s lead time ahead of the FOMC statement on November 3 that announced the gritty details of the Fed’s much anticipated, full-blown resumption of its large scale Treasury purchase program (affectionately known to all as QE2, except by Bernanke himself).
Paging Ron Paul’s subpoena committee.
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