Hypothetical Bias

UofL vs UT: 9:57 tipoff

Tonight I'm following a mini-max strategy. I'm pulling for the team/coach I dislike least (UofL/Pitino). From the Daily Fix:

The matchup between Louisville and Tennessee comes lots of talk about the men on the sidelines: the Cardinals’ Rick Pitino and the Volunteers’ Bruce Pearl.

In the Lexington Herald-Leader, John Clay wants to see Mr. Pearl clad entirely in orange (”like one big Valencia”) and Mr. Pitino in Colonel Sandersesque white head to toe.

“Here’s Pitino, who resurrected Kentucky basketball in the 1990s by employing a pressing, up-tempo style mixed with master marketing and sideline theatrics,” he writes. “Here’s Pearl, who has resurrected Tennessee basketball by employing a pressing, running, up-tempo style, mixed with master marketing and sideline theatrics.”

Over to the Louisville Courier-Journal, where Eric Crawford has the benefit of six years covering Mr. Pearl and seven covering Mr. Pitino, and says in some ways the two are quite different.

“After a win, Pitino is apt to head out to an upscale eatery such as Porcini,” he writes. “I went looking for Pearl after the University of Kentucky game in Knoxville last season, and he already had changed into a cabana shirt and was hanging out with a crowd of boosters. … Here’s where they are similar. Both are willing to adapt their personal styles to give themselves a chance to win. Both are driven by an other-worldly work ethic. Both are big believers in creating momentum and using it to their advantage, and in having their teams apply pressure rather than react to it. And both are marvelous motivators.”

New monetary policy tools on the Fed's website

The Fed has added 3 new monetary policy tools on their webpage. Numbers 1-3 are in every economics textbook. Number 4 was new back in February when I first checked with my macro class. Numbers 5 and 6 were added in March.

1. Open Market Operations
2. The Discount Rate
3. Reserve Requirements
4. Term Auction Facility
5. Primary Dealer Credit Facility
6. Term Securities Lending Facility

My lecture notes suck

I figured out how to save my lecture notes as a PDF file. Here they are from Wed, March 26. Will someone please tell my department chair and dean that I need to be removed from the classroom?

TSLF, AAA, RMBs, CMOs and CMBs

From Real Time Economics (New York Fed Unveils TSLF Terms):

The Federal Reserve Bank of New York announced the terms of its first Treasury swap auction set for March 27, indicating that it will offer $75 billion in government securities to the primary dealer banks and modifying the type of collateral it will accept in return.

The Term Securities Lending Facility, announced in early March, is an extension of an already existing facility at the New York Fed. Under the extended facility, primary dealers not only can offer a broader range of collateral against Treasury securities, they can also borrow for a longer term — 28 days versus overnight.

In total, the New York Fed has been authorized to lend up to $200 billion of Treasury securities through TSLF auctions. TSLF, the Fed’s latest tool to help revive strained financial markets, was created last week and will supply banks with scarce Treasury securities in exchange for less-liquid securities.

Market participants hope the new tool with help to ease conditions in strained securities repurchase markets and curb investors’ mad dash for cash. ...

More unusual monetary policy

The Fed's Press Release:

The Federal Reserve on Sunday announced two initiatives designed to bolster market liquidity and promote orderly market functioning. Liquid, well-functioning markets are essential for the promotion of economic growth.

First, the Federal Reserve Board voted unanimously to authorize the Federal Reserve Bank of New York to create a lending facility to improve the ability of primary dealers to provide financing to participants in securitization markets. This facility will be available for business on Monday, March 17. It will be in place for at least six months and may be extended as conditions warrant. Credit extended to primary dealers under this facility may be collateralized by a broad range of investment-grade debt securities. The interest rate charged on such credit will be the same as the primary credit rate, or discount rate, at the Federal Reserve Bank of New York.

Second, the Federal Reserve Board unanimously approved a request by the Federal Reserve Bank of New York to decrease the primary credit rate from 3-1/2 percent to 3-1/4 percent, effective immediately. This step lowers the spread of the primary credit rate over the Federal Open Market Committee’s target federal funds rate to 1/4 percentage point. The Board also approved an increase in the maximum maturity of primary credit loans to 90 days from 30 days.

The Board also approved the financing arrangement announced by JPMorgan Chase & Co. and The Bear Stearns Companies Inc.

Here is what the WSJ's Morning Report is saying:

Crazy world.