Fed Chair Jerome Powell says the “Federal Reserve is not and will not be a ‘climate policymaker.’” Actions prove otherwise.
The Fed’s New Climate-Change Mandate
Please consider the Fed’s New Climate-Change Mandate
The Federal Reserve, Federal Deposit Insurance Corp., and Comptroller of the Currency on Tuesday published guidance directing banks on how to manage putative climate risks. The agencies say they aren’t dictating how banks lend to accelerate the shift to a lower-carbon economy. But reading between the lines, that’s exactly what they’re doing.
The guidance says banks must manage their balance sheets for physical risks from climate change, such as flooding or drought, as well as the “stresses to institutions or sectors arising from the shifts in policy, consumer and business sentiment, or technologies associated with the changes that would be part of a transition to a lower carbon economy.”
In other words, banks will need to consider their lending priorities with the climate lobby’s preferred policies and predictions in mind, whether or not those predictions are likely to happen. That would mean reducing exposure to fossil fuels because President Biden has set a goal of eliminating carbon emissions from the power grid by 2035 and achieving a “net-zero” economy by 2050.
The guidance also says management should set “lending limits related to material climate-related financial risks” and consider “the evolving legal and regulatory landscape.”
Fed Chair Jerome Powell, who voted for the guidance, in a statement said “it is not the Fed’s role to tell banks which businesses they can and cannot lend to, and this guidance is not intended to do so,” adding the “Federal Reserve is not and will not be a ‘climate policymaker.’”
An Official Denial
“Never believe anything until it’s officially denied,” is a phrase of uncertain origin but most often attributed to Otto Von Bismarck.
Joint Proclamation
The Fed says it will not be a climate policymaker but that is exactly what the Fed, FDIC, and the Comptroller of the Currency (US Treasury Department) are doing with their Joint Proclamation.
Summary: The OCC, Board, and FDIC (together, the agencies) are jointly issuing principles that provide a high-level framework for the safe and sound management of exposures to climate related financial risks (principles). Although all financial institutions, regardless of size, may have material exposures to climate-related financial risks, these principles are intended for the largest financial institutions, those with over $100 billion in total consolidated assets. The principles are intended to support efforts by large financial institutions to focus on key aspects of climate-related financial risk management.
Click on the above link for the 23-page document.
Beyond Absurd
The Fed blew three consecutive economic bubbles, was clueless about the inflationary impacts of QE and fiscal stimulus, was asleep at the wheel when Silicon Valley Bank blew up, has never spotted a recession in advance, but wants banks to plan for climate change risk that could be decades away if ever.
Hello Jerome Powell, your pathetic official denial is fully transparent. This is stupid, and you know it.
Powell Discusses What the Fed Could Have Done to Prevent Inflation Rise
On October 20, I commented Powell Discusses What the Fed Could Have Done to Prevent Inflation Rise
Powell Clips
- No precision in understanding monetary policy lags.
- Markets have been front running Fed policy changes.
- Household savings are higher, spending has been higher.
- We should be seeing effects of monetary policy arriving
- Fed has slowed on rates to give policy time to work.
- There is a lot of uncertainty on lags
- It is very hard to know how economy can grow with higher rates
- By any reckoning, neutral rates ebbed over recent decades, unsure where it is now
- Models useful but have to look at what the economy is telling us
- With hindsight possible Fed could have done less during pandemic
- Bond yield rise doesn’t seem to be about expectations of Fed doing more on rates
- Is unclear if bond yield rise will be persistent, markets are volatile.
- We will let market yield rise play out, Fed will watch it.
Powell says the Fed “could have” done something when it’s damn clear the Fed has no idea what it’s doing at all.
How the Fed Destroyed the Housing Market
Also see How the Fed Destroyed the Housing Market and Created Inflation in Pictures
The longer the Fed holds rates high, the longer the housing transaction crash lasts. But cutting rates will further expand the housing bubble, asset bubbles in general. And bubbles are destabilizing.
This is the Fed’s tightrope dilemma, of its own making, foolishly hoping to make up for lack of enough inflation, calculated by not factoring in home prices or asset bubbles.
Does the Fed ever get anything right?
On top of it all, the Fed effectively has just undertaken climate change as an unofficial mandate.
What a hoot.
“..was clueless about the inflationary impacts of QE and fiscal stimulus…”
It’s a strict subset of “clueless about absolutely everything.” There exists non-clueless means of arbitrarily printing money out of thin air and handing it to money centre bankers in exchange for nothing. Anyone engaged in that, is clueless per definition.
Then only sad part, is to witness the number of, even non money centre bankers, who are also clueless enough to not immediately recognise this. But who instead sit there mindlessly regurgitating one childbrained supposed “excuse” for the theft after another.
The fed is simply stating the obvious here. As I have mentioned numerous times, the largest investors (sovereign wealth funds, global pension funds, large endowment funds, etc) have been divesting for ten years from areas that contribute to global warming (fossil fuels in particular). And major lenders have pulled back funding as well. This “statement” from the fed is just a few more straws on the existing haystack.
It is what it is. I accept that. Then I look for ways to profit from it.
The net result of fewer big investors and lenders in the oil and gas sector is the necessity for those companies to be self sufficient and not dependent on the big investors and lenders.
As such, they have reduced capex, and put more of their cash flow into reducing or eliminating debt. Once the debts are paid off, they then begin to reward the shareholders who have remained with big share buybacks and large dividend payouts.
With breakevens as low as $30, and WTI over $80, most oil companies are generating 15-20% FCF. Which will increase over time as buybacks reduce share counts.
Got oil?
…but there is no inflation; and no money was printed.
Price rises are NOT inflation (FFS!)… credit has contracted… this is the opposite of “money printing”… there is less currency, fewer Eurodollars & Fed dollars than before.
Not just the Federal Reserve, but every single central bank in the world.
Lagarde from the ECB truly believes she’s all powerful and has more power aside from her mandates, which by the way, she’s failed to achieve.
It’s a delusion of grandeur, too much power makes these people believe their own lies.
I can only hope, this economic downturn will turn out to be severe.
I’m truly sorry about rising unemployment, but it’s unavoidable.
It’s been 15 years since we had a recession. Recessions are necessary and serve to weed out the rot.
Because of interest-rate manipulation, fraudulent monetary policies and moneyprinting….they’ve managed to postpone this recession.
But it’s coming and it’s coming back with a vengeance.
WAY too much debt, WAY too many derivatives, WAY too much financial engineering and an everything-bubble that has grown to dangerous proportions.
This climate narrative is in part a scheme concocted by supra-national organizations because they’re desperately trying to prevent an economic downturn of biblical proportions. ESG is an example of that.
Mish is absolutely right. This economic nightmare is largely due to mismanaging our monetary system. Whether that’s due to too much deregulation, artificially and fraudulently low interestrates for 14 years or an investment/financial/banking industry that’s become too powerful….or all of the above.
The market has been frontrunning the delusion of a pivot.
Yeah, let’s try ZIRP and NIRP again. More financial repression, more debt and free money for the 1%….utterly insane.
But, greed is a powerful thing and there’s an entire generation out there that hasn’t known anything else but an era of free money.
And now that has ended, it’s hard for them to let go of the free ride. But it really is over.
Is it really over?
I don’t see it quite like that, but I do agree with most of what you stated, so I am just offering up a different point of view, from my personal experiences.
– Student Loan Forgiveness
> Didn’t pass, but they can do it other ways. Students can just not pay. Fed going to attach there assets? They don’t have any! After a decade, or less depending on election results, they will be wiped clean to clear off the books, and any residual left over print…
This scenario applies to Property Owners that haven’t received rent. Same thing as to get it from where? They don’t have any money or anything to take. After a decade, or less depending on election results, they will be wiped clean as well.
Of course Taxpayers will foot part of the bill, unannounced to those not paying attention, as usual, but not all of it, as usual. The owners are Taxpayers too, and Taxpayers Always Lose Out in these type of situations!!!
And the beat goes on…
there was no money printing… QE is just an asset swap of debt instruments for reserves, and reserves aren’t money because they can’t be spent in the economy.
what there is, is record excessive global debt, growing demographic imbalance, and a host of idiotic policies like netzero, sanctions, illegal immigration, lockdowns, that cause price rises due to relative scarcity… all of that hiding a gigantic deflation problem, as global trade declines, and huge hidden problems inside China, play out painfully.
anyone else thinking about how war has a devastating effect on the climate Nord stream gas release Oil wells ablaze, how much diesel for the tanks, kerosene for the planes It’s mind boggling and meanwhile the same people tell us we can’t have gas stoves in our kitchens or cows for milk and meat Unbelieveable hypocrisy if you think about it
true, and it hints at what the real cause of price rises is, because it definitely isn’t imaginary inflation.
Notice how Powell said “could” instead of “should.” Nope, no mistake there. I guess the FED “could” have bought everyone a unicorn to ride.
The Fed knows exactly what they are doing, it’s not an accident
Exactly!
In my neighborhood the property bubble continues to rise…IMHA higher rates are needed now. Don’t forget when rates were regulated they were in the 7ish range for decades.
Confirmation of stupidity that blatant climate religion lies:
Both FLOODs and DROUGHTS are symptoms!!
“Whatta-HOOT!”
What an absolutely ridiculous headline. First and foremost the headline is roughly 2-3 Years Late! The Fed and Biden Inc. have been pushing, and forcing one could say, all sorts of radical agendas ever since Old Joe took over the office, in theory anyway but I digress.
From Climate Change, Stopping Drilling, Opening Borders Up, Using 3-Letter Agencies for nefarious purposes, and so much more. It’s just a joke to put in print on 10/23, something that has been taking place since maybe 06/21 or so. Makes the writers look like absolute fools, and destroys the credibility of the Outlet.
It is the Fed’s business to blow asset bubbles so they have something to monetize. The green scam is as good as anything since the dot.com bubble. Even better than housing, because the housing bubble ran up against the regular person’s ability to pay. The green scam won’t. They can just pretend the windmills are worth whatever they want the same as they do now. Later, when it eventually becomes obvious that nobody wants to or even can purchase wind power because it is too intermittent, they can write them off without putting anybody out of a house. It will be about as much of a crisis as Pets.com was. Sure, the landscape will be worse with all these useless towers degrading in the elements, but that’s the biggest long term impact. I’m sure they’ll take them down for the steel just as abandoned railways get taken up. In the end nothing will be left besides a bunch of carbon fiber blades in the landfills. They can put a park on top.
Well, there will also be all those concrete plinths cluttering the farmland and giving AI tractors something to steer around. Too expensive to break up and remove.
These dimwit bulbs are the most devastation force to the environment. By super-loo interest rates, they encourage it.
They are in climate change business up to their necks, and don’t even know it.
In fairness to the Fed, we think about climate change daily in our ongoing real estate investment decisions so it would be foolish if banks didn’t also do so. Do I want to invest in South Beach hotels if Collins Ave is already frequently submerged? Probably not. Do I want to be long Phoenix housing development if they can’t supply water to houses already in the pipeline? Probably not.
If policy is driving toward a less carbon intensive economy, do I want to consider this as part of my asset allocation process? Probably.
As long as they are telling banks they have to think about such things and wrap some policy around it, rather than setting the limits for the banks, I don’t see a big problem. It seems like a fairly normal thing for the bank to do. If it had related to something other than climate change, I’m guessing it would not have made your radar.
The problem is the time frame on most of these questions you asked is decades. No one making decisions today is going to be around when those time frames hit. Humanity has never tried to set policies things that may or may not occur for decades in the future before.
You can confidently invest in South Beach or Phoenix today because none of the issues you describe are happening now nor are they going to happen anytime soon so you have plenty of time to sell those investments. Why do you think rich people continue to buy waterfront property.
Because they are stupid
Rich people can easily afford to have their property value collapse Not so much the rest of us And I wouldn’t be so sure those areas will be viable in 15 to 20 years but who knows for sure Me personally would rather not risk it
No worries mate, when we all drive EVs and have solar panels on the roof, climate gonna be jus fine, chances are that the sea might even withdraw from the beachfront when we stop eating meat …..
You around Brussels, might eat ze bugs, and be happy if you can find some.
Simple Rule to Follow:
Don’t EVER let the Camels Nose in the Tent!
In Boy Scouts I remember it don’t ever let the beta boys in the tent
Good reply
I get that, but if they are playing the climate change game (and I’m glad Mish let us know that they are) … they shouldn’t deny it.
even if sea levels rose to a noticeable level, there are plenty of civil engineering and dredging companies that know how to build dykes and reclaim land, and build artificial beaches, or repair existing ones. Humans have been manipulating land for ages.