Richard W Fisher: Beer goggles, monetary camels, the eye of the needle and the first law of holes Remarks by Mr Richard W Fisher, President and Chief Executive Officer of the Federal Reserve Bank of Dallas, before the National Association of Corporate Directors, Dallas, Texas, 14 January 2014. *  *  *  With reference to Peter Boockvar, the Book of Matthew, Sherlock Holmes, “The Wolf of Wall Street” and Denis Healey. The views expressed by the author do not necessarily reflect official positions of the Federal Reserve System. Thank you, George [Jones]. George is a great member of the Dallas Fed board of directors, and I am honored he would take the time to introduce me. Waylon Jennings said of your namesake that “if we could all sound like we wanted to, we’d all sound like George Jones.”1 I often feel that way about George at our board meetings. He gives a sharp, crisp, spot-on briefing of banking conditions in that deep, beautiful voice of his and I always think: I want to be just like George when I grow up. Again, thank you George for that kind introduction. During the holiday break, I spent a good deal of time trying to organize my thoughts on how I will approach monetary policy going forward. Today, I am going to share some of those thoughts that might be of interest to you as corporate directors.
While much effort has been made to deepen our understanding of and ability to respond to market dislocation since the global financial crisis, the emergence of these problems suggests the Bank and wider central banking community still have some work to do in throwing light on and building resilience in some of the shadow-ier parts of the non-bank financial sector, as emphasised by my colleagues on the FPC and internationally in the FSB. But that is for the future. Right now, we are dealing with the problems that pose an immediate threat. The intervention announced yesterday by the Bank is intended to facilitate an orderly adjustment in the positions and structures that were threatening to generate dysfunction in that market segment. By acting in the gilt market to facilitate the necessary reduction of leverage – or at least creating an environment where that reduction can take place – the Bank is preventing a self-sustaining vicious spiral of collateral calls, forced sales and disappearing liquidity from emerging in a core segment of the financial markets. Restoring market functioning helps reduce any risks from contagion to credit conditions for UK households and businesses. The intervention is targeted specifically at that market segment where problems were emerging. And it is time-limited, because the Bank buys assets in order to sell them on afterwards, thereby helping the orderly re-shuffling of holdings of and exposures to longer-dated gilts that needs to  Page 4  take place. These operations do not create central bank money on a lasting basis.