'The height of entitlement': A Fed president retaliates against banker complaints over capital-injection operations

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'The height of entitlement': A Fed president retaliates against banker complaints over capital-injection operations

neel kashkari

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  • Minneapolis Fed President Neel Kashkari responded to Wall Street's complaints regarding repo operations, telling Axios the bankers don't like the policy because "they think it makes them look weak."
  • The banks would rather rely on the central bank to front the risk than shoulder the burden themselves, he said, calling the action "the height of entitlement if ever there was one."
  • Kashkari noted he will "likely be in favor" of voting for an additional rate cut when the Federal Open Market Committee meets October 29.
  • Visit the Markets Insider homepage for more stories.

Minneapolis Federal Reserve President Neel Kashkari fired back at bankers' complaints about repo operations, telling Axios "they don't like it because they think it makes them look weak."

The Fed recently began injecting additional capital into money markets through market repurchase - or repo - agreements after short-term borrowing rates shot above the central bank's intended window mid-September.

While some players viewed the repo operations as a sign the Fed was lagging behind market movements, Kashkari views the Fed's actions as a safety net bankers have grown too comfortable with.

The Fed gives banks an emergency source of funding should they experience the kind of liquidity problem they faced in September, yet the firms would rather rely on the central bank than front the risk themselves, Kashkari said.

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"They don't want to use it so the New York Fed should have run to comfort them more quickly with a new facility," he said. "That's called the height of entitlement if ever there was one."

The Fed announced Friday it would begin purchasing $60 billion worth of Treasury bills each month starting October 15 to further control its benchmark interest rate. The purchases, coupled with continued repo operations, are meant to quell liquidity pressures, and "do not represent a change" to the Fed's monetary policy position, the bank said in a statement.

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The Fed president also responded to claims that President Trump has influenced policy through tweets and spoken criticism. Trump has repeatedly pressured the Fed to lower interest rates, a move that's reinforced the central bank's nonpartisan status.

"The louder the politics gets turned up, the more we hug data and analysis," Kashkari told Axios.

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He added that he "will likely be in favor" of voting for a rate cut during the Federal Open Market Committee meeting slated for October 29.

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