The Alchemists: Three Central Bankers and a World on Fire (64 page)

history of banking in.
See
European banking history

European banking history

Bank for International Settlements (BIS), 59

Bank of England, creation of, 27

euro, launch of, 75–77, 82–83

European Central Bank (ECB) established, 77, 81–82

European Economic Community, 74–75

first central bank (Sweden), 24

Maastricht Treaty, 77

Overend, Gurney & Co. collapse, 10, 26–34

Panic of 1866 bailout, 27–28, 32–34

Reichsbank, creation of, 47

Stockholms Banco rise and fall, 17–24

European Central Bank (ECB)

Bundesbank as model for, 77

chief economist.
See
Stark, Jürgen

English as language of, 135–36

establishment of, 77, 81–82

first president, conflict over, 81–82

Global Economy Meeting (2010), 223–32

Governing Council meetings, 135–37

location in Frankfurt, 81

nationalist protests against, 297

Outright Money Transactions (OMT), 382–84

powers of, 81

president, selection of, 298

prohibitions, going beyond, 221–22, 320–21

thirty-year secrecy rule, 136, 230–32

European Central Bank (ECB) remedies

austerity programs.
See
Deficit reduction

BNP Paribas bailout (2007), 3–4, 111

bond purchases by.
See
Securities Markets Programme (SMP)

and central banker.
See
Draghi, Mario; Trichet, Jean-Claude

effectiveness of, 286–87, 295, 317

errors and fiscal crisis, 135–37, 212–13, 303–5

Geithner on bolder moves, 219, 226, 324

and Greek debt restructuring, 312–16

to Greek financial crisis, 209–13, 215–19

interest rate cuts (2011), 344, 353

interest rate hike (2008), 137, 160

interest rate hike (2011), 303–4

internal devaluation, 302–3

Ireland bailout, 283–84, 292–94

lack of coordination problem, 158–61

oversight of foreign banks, 216, 283–86, 294–96

tight money approach, 208–9

wall of money approach (2011), 350–53

European Commission, 75

European Economic Community, 74–75

European financial crises

British pound devaluation (1992), 72–73

German hyperinflation (1914–1918), 47–53

German hyperinflation, pre–Nazi era, 50–53, 60

Panic of 1866 (England), 26–28, 31–34

Stockholms Banco rise and fall, 17–24

of 2007–2012.
See
European financial crisis (2007–2012); Eurozone countries;
individual countries

European financial crisis (2007–2012).
See also
individual countries

beginning of, 1–8, 111–12

BNP Paribas collapse, 1–4, 111

British crisis, 236–46, 251–52, 332–36

Federal Reserve interventions, 131–32, 153–55, 226–27, 229, 349–50

global interventions, 128–32, 161–63, 349–50

Greece crisis, 201–23, 285–91, 306–16

Iceland crisis, 284

Ireland crisis, 158–59, 283–84, 292–95

Italy crisis, 316–17, 316–23

mortgage-backed securities exposure, 129, 145, 159

Northern Rock PLC crisis, 125–28

Portugal crisis, 296–98

remedies.
See
Bank of England; European Central Bank (ECB); International Monetary Fund (IMF)

Spain crisis, 317–23

time line for, xi–xvii

worsening (2011–2012), 348–49, 354–55

European Financial Stability Facility, 230, 320

bank charter issue, 324, 326

European Parliament, 77

Eurozone.
See also
specific countries

bank stress tests (2010), 287–88

countries outside of, 77, 81–82, 291

creditor nations, 297, 301–2

debtor nations, 213–14, 301

debtor problems, differences in, 213–14, 302, 315

depression, countries in, 292, 303, 341, 389

economic unity, necessity of, 78–80, 212–13

Franco-German Declaration, 289–92

GIPSI nations, 213–14

imbalances, remedies for, 302–3

leadership changes by 2012, 294–96, 341–42, 348, 356

monetary policy decisions.
See
European Central Bank (ECB)

PIIGS nations, 213

political fissures, 289–92, 297, 304–5

private-sector involvement, 312–16

recession (2012), 354–55

U.S. economic functioning compared to, 78–80

Evans, Charles, 264, 275

economic actions advocated by, 337–38, 386–87

Exchange rate mechanism

British pound devaluation (1992), 72–73

exit of countries from, 74

Exchequer, chancellors.
See
Darling, Alistair; Osborne, George

Exit strategy, 259, 261

Fallon, Kieran, 140

Fannie Mae/Freddie Mac

conservatorship for, 141, 163

QE1 mortgage-backed securities purchases, 263

Federal Deposit Insurance Corporation (FDIC), 77–78

Federal Open Market Committee (FOMC)

attendees of, 118

housing bubble, central bankers fears (2005), 104–7

meetings, structure of, 119

quantitative easing (QE2), 254–55, 274–76

Teal Book, 262, 330

Federal Reserve

Board of Governors, 44–45

creation of, 35–36, 44–45

decision-making body.
See
Federal Open Market Committee

dissolution of charter (1928), 45

and end of inflation of 1970s, 69–71

establishment, difficulty of, 10–11

on exit strategy, 259, 261

Fed rules for journalists, 262–63

and financial crisis (2007–2012).
See
Bernanke, Ben; Federal Reserve remedies

past chairmen.
See
Burns, Arthur; Greenspan, Alan; Miller, G. William; Volcker, Paul

and post–World War II prosperity, 10

power, efforts to cut (2009), 169–76

public trust established, 71

reform after crisis.
See
U.S. financial reform

trading operations of, 277–78

Federal Reserve Act (1913), 45–46

emergency 13(3) provision, 133–34

Federal Reserve Bank (New York), 276–77

Federal Reserve Bank of Kansas City Economic Policy Symposium.
See
Jackson Hole conference

Federal Reserve remedies

Bernanke defends actions, 170–71, 176–77, 181–82

cash infusions.
See
Bailouts

Commercial Paper Funding Facility, 150–51

currency swaps, 130, 153–55, 227, 229, 349–50

European crisis interventions, 131–32, 153–55, 226–27, 229, 349–50

Fannie/Freddie conservatorship, 141, 163

Fed “try it all” approach, 149–51

interest rate cuts (2007–), 128, 163

interest rate hike (2014), 339

Maturity Extension Program, 331–32, 340

for money market funds, 150–51

nominal GDP targeting as topic, 338–39

Operation Twist, 331–32

Operation Twist 2, 340

quantitative easing (QE1), 263

quantitative easing (QE2), 255–80

Term Auction Facility (TAF), 131–32

Federal Reserve Transparency Act, 175–76

Feingold, Russell, 189

Feinstein, Dianne, 191

Feldman, Gerald D., 48

Feldstein, Martin, 79–80, 117

Felsenthal, Mark, 254

Ferdinand, Franz, 48

Ferguson, Roger, 99

Financial accelerator, 7, 58, 119, 132

Financial crises.
See also
European financial crises; U.S. financial crises

central bank errors during.
See
Central bank ineffectiveness

financial accelerator for, 7, 58, 119, 132

Japanese deflation (1990s), 84–92

Millennium Bridge analogy, 107–8

public debt crisis, effects of, 202

recessionary/inflationary.
See
Inflation; Recessions

runs on banks.
See
Bank failures

time line for, ix–xi

of 2007–2012.
See
European financial crisis (2007–2012); U.S. financial crisis (2007–2012)

Financial industry

home mortgages, risky products, 99–100

mortgage-backed securities as creation of, 101–2

risk taking and rewards, 107

Financial markets

central bankers’ comments, impact on, 9

decline (2001), 99

Flash Crash, 218–19, 243

global stock market decline (2009), 165

stock market drop (2008), 145

Financial reform.
See
U.S. financial reform

Financial Services Authority, 122, 234, 238

Financial Stability Board, 300

Fine, Camden, 178, 190, 196

Finland, anti-EU position, 297

First Name Club meeting (1910), 35–36, 43–44

Fischer, Stanley, 116

Fisher, Paul, 241

Fisher, Richard, 164, 187, 193, 196, 264, 275, 330, 332

Fixed-rate tender with full allotment, 3–4

Flaherty, Jim, 209

Flash Crash, 218–19, 243

Ford, Gerald, inflation, approach to, 67

France

central bank.
See
Banque de France

-England adversarial relationship, 55, 57

and European unity negotiations, 76–77, 81–82

Franco-German Declaration, 289–92

gold hoarding (1927–), 55, 58, 59

Great Depression, stability during, 55, 58, 59

inflation rate (1980s), 75

presidents.
See
Hollande, François; Sarkozy, Nicolas

steel and coal production pooling, 74–75

Franco-German Declaration, 289–92

Frank, Barney, 146, 170.
See also
Dodd-Frank Act

Free Banking Era, U.S., 39

Friedman, Stephen, 195

Frum, David, 66

Gang Fan, 372

Geithner, Timothy

and Bernanke reappointment, 182–83

defends Fed actions during crisis, 177–78

to ECB on bolder moves, 219, 226, 324

and financial reform process, 177–78, 186–87

on first day of crisis, 4, 5

and investment bank bailouts, 42, 133, 140, 142, 146–47

at Jackson Hole (2007), 111–12

-Trichet relationship, 219, 317

George, Edward, 7

Germany

bank crisis, beginning of (2008), 160

Berlin Wall, end of, 76–77

central bank.
See
Bundesbank

chancellors.
See
Kohl, Helmut; Merkel, Angela

coordinated plan, rejection of, 159–60

economy (2012), 354, 356

and European unity negotiations, 76–77, 81–82

Franco-German Declaration, 289–92

Great Depression, actions during, 57, 58–60

Greek bailout protests, 210–11, 288–89

Hitler rise and economic conditions, 50–53, 60

inflation rate (1980s), 75

mark as new currency (1923), 53

mark exchange rate fixed (1923), 54

post–World War I reparations, 49–50

prosperity of 1920s, 54

Reichsbank (1914–1918) caused hyperinflation, 47–53

steel and coal production pooling, 74–75

Wall Street crash (1929), impact on, 57, 58–60

Gertler, Mark, 119

Giles, Chris, 249

Gingrich, Newt, 330

GIPSI nations, 213, 217

ECB bond purchases, 286–87

Gladstone, William, 32

Glass, Carter, 44–45

Global economy

emerging nations collapse (1990s), 101

during Great Moderation, 94–95

Global Economy Meeting (2010), 223–32

Golden Dawn, 357–59, 378

Gold standard

abandoned during Great Depression, 60–61

abandoned during Nixon administration, 62–64

Bretton Woods (1944) gold window, 63

post–World War I, 54–55

Gonzalez, Henry B., 96

Grayson, Alan, 186

Great Britain

bank regulation.
See
Financial Services Authority

Black Friday (1866), 10, 26, 28

central bank.
See
Bank of England

empire, connection to banks, 10, 28–31

-France adversarial relationship, 55, 57

Great Depression, actions during, 60

during Great Moderation, 94

housing price increase (2005), 100

outside the eurozone, 77, 81–82, 291

Great Britain financial crisis, 236–46, 332–36

and Conservative Party victory, 244

deficit reduction, 237–38, 241–49

eurozone impact on, 333

inflation (2010–2011), 245, 251–52, 334

remedies.
See
Bank of England; King, Mervyn

stagflation (2010–2011), 251–53, 334

unemployment (2009–2011), 236, 248, 251, 334

worsening (2011–2012), 387–88

Great Depression

bailout (1929), 56

Bernanke as scholar of, 7–8, 119–20, 149–50

as central banking failure, 11, 60–61, 84–85, 132

Federal Reserve actions during, 56, 58

gold standard abandoned, 60

moralistic view of, 56–57

and Wall Street crash (1929), 54, 56–58

Great Inflation.
See
Inflation (1971–1979)

Great Moderation, 94–95, 98–99, 106–7

criteria, Jackson Hole Consensus on, 98

trouble, signs during, 104–7

Greece

central bank.
See
Bank of Greece

as eurozone member, 203

inflation (2000s), 203–4

Greece financial crisis, 201–23, 285–91, 306–16

bailouts (2010–2011), 215–19, 286–89, 310–11

budget deficit (2009), 201–2

causes of, 204–5

coalition government (2012), 356–58

debt restructuring (2011), 312–16

deficit reduction, 209–10, 215–16, 286, 287, 297, 302, 353–54

deficit reduction failure, 297, 308–9

ECB vague statement on, 212–13

euro, referendum on keeping, 343, 345, 357

German resentment of bailout, 210–12, 288–89

global impact of, 208, 213–14, 217–19

Greek borrowing costs (2010), 213, 215, 217

IMF involvement, 205–6, 211–12, 215–17, 285–86

Papandreou statement of need, 215, 306

and political fissures, 341–42, 354