A Financial Crisis is a Terrible Thing to Waste: Rapid Learning at the Federal Reserve, Erik Soell

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Rapid eLearning Case Study from the Federal Reserve of St. Louis

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  • 14
  • A Financial Crisis is a Terrible Thing to Waste: Rapid Learning at the Federal Reserve, Erik Soell

    1. 1. © 2014 Federal Reserve Bank of St. Louis | Not for Public Release Rapid Learning at the Fed “a financial crisis is a terrible thing to waste” May 14, 2014 Erik Soell Director Rapid Communications at the St. Louis Federal Reserve Bank
    2. 2. © 2014 Federal Reserve Bank of St. Louis 2 Information is giving out; communication is getting through (Syndey J. Harris) These are my views and not necessarily those of the Federal Reserve Bank of St. Louis nor the Federal Reserve System.
    3. 3. © 2014 Federal Reserve Bank of St. Louis 3 Pop Quiz Q1: True or false: The Federal Reserve produces both coin and paper currency.
    4. 4. © 2014 Federal Reserve Bank of St. Louis 4 Pop Quiz Q2: What major anniversary is the Federal Reserve is celebrating this year?
    5. 5. © 2014 Federal Reserve Bank of St. Louis 5 Pop Quiz Q3: True or False: The Federal Reserve was born out of a secret meeting between elite businessmen who met at Jekyll Island, GA?
    6. 6. © 2014 Federal Reserve Bank of St. Louis 6 First, a Few Things about the Fed • The Federal Reserve was created by Congress in 1913 with an important mission: Influence the supply of money and credit Respond to financial panics Regulate and supervise financial institutions Serve as a banking and fiscal agent for the U.S. government
    7. 7. © 2014 Federal Reserve Bank of St. Louis 7 How Does the Federal Reserve Function? A balance of power • 7 Members of the Board of Governors in Washington, D.C. • 12 Federal Reserve Bank Presidents • Public-private partnership in votes on monetary policy decisions (7 Governors; 5 Presidents) Arms-length from partisan politics • Members of the Board of Governors are appointed by the President and confirmed by Congress • Federal Reserve Presidents are selected by the local Board of Directors and approved by the Board of Governors Budget autonomy • Expenses covered through securities investments held for Open Market Operations • All excess revenues returned to the Treasury ($88B in 2013)
    8. 8. © 2014 Federal Reserve Bank of St. Louis 8 Source: BLS and Loan Performance -Haver Analytics The Bust in the Housing Market Was the Obvious Cause of the Financial Crisis
    9. 9. © 2014 Federal Reserve Bank of St. Louis 9 “Conventional” mortgages were generally sold to Fannie Mae and Freddie Mac “Nonprime” mortgages were pipelined through mortgage companies Mortgages were then transformed into “mortgage-backed securities” The U.S. “spread the risk” Moreover, Large Investment Banks Were at the Epicenter because of Their Role in Creating Securities from Mortgages
    10. 10. © 2014 Federal Reserve Bank of St. Louis 10 The Decline in House Prices Was Fast and Extended Source: Federal Housing Finance Agency Seasonally Adjusted Expanded HPI
    11. 11. © 2014 Federal Reserve Bank of St. Louis 11 The Resulting Crisis Required a Massive Response Fed • Eased monetary policy and provided funds (liquidity) to stabilize financial markets both domestically and internationally US Government • Funded the Troubled Asset Relief Program, the $800 billion economic stimulus, Cash for Clunkers, Homebuyer Tax Credit, and extended unemployment benefits FDIC •Raised bank deposit insurance limits and provided other bank debt guarantees First responders to the financial crisis
    12. 12. © 2014 Federal Reserve Bank of St. Louis 12 The Headlines
    13. 13. © 2014 Federal Reserve Bank of St. Louis 13 Former Chairman Bernanke’s View “… it was kind of like you’re in a car wreck or something. You’re mostly involved in trying to avoid going off the bridge. And then, later on, you say: ‘Oh my God.’” Source: Brookings Institute, January 16, 2014
    14. 14. © 2014 Federal Reserve Bank of St. Louis 14 The Federal Reserve’s Response to the Financial Crisis • Reduced the federal funds rate to near zero (traditional policy) • Expanded traditional lending programs to banks (traditional policy) • Created emergency loan packages for AIG and Bear Stearns, using the “unusual and exigent” provisions of the Federal Reserve Act • Executed broad-based lending to financial markets, using the “unusual and exigent” provisions of the Federal Reserve Act
    15. 15. © 2014 Federal Reserve Bank of St. Louis 15 The Actions of the Federal Reserve, Treasury, and the FDIC Prevented a Collapse of the Financial System… Source: British Bankers Associations and Reuters
    16. 16. © 2014 Federal Reserve Bank of St. Louis 16 However, We Did Not Avoid a “Great Recession” Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis, U.S. Department of Commerce: Bureau of Economic Analysis
    17. 17. © 2014 Federal Reserve Bank of St. Louis 17 Quantitative Easing from a Balance Sheet Perspective Nontraditional monetary policy tool: Large Scale Asset Purchases (QE1, QE2, and QE3) Lending and liquidity programs to respond to the financial crisis Source: Federal Reserve Board
    18. 18. © 2014 Federal Reserve Bank of St. Louis 18 The Result Has Been a Gradual Decline in the Unemployment Rate Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis, U.S. Department of Commerce: Bureau of Economic Analysis
    19. 19. © 2014 Federal Reserve Bank of St. Louis 19 Failed Banks and Thrifts Source: FDIC • Most do not realize that over 500 community banks have failed over the last five years.
    20. 20. © 2014 Federal Reserve Bank of St. Louis 20 There Are Still a Large Number of “Problem” Banks Source: FDIC
    21. 21. © 2014 Federal Reserve Bank of St. Louis 21 Beyond Banking, Housing Issues Remain in Some Parts of the Country 8.76% 4.99% 0 2 4 6 8 10 Percentage(%) January 2007-December 2013 U.S. Percentage of Seriously Delinquent Loans As of December 31, 2013 Source: Core Logic
    22. 22. © 2014 Federal Reserve Bank of St. Louis 22 “It’s a Phone Call” • <video removed>
    23. 23. © 2014 Federal Reserve Bank of St. Louis 23 The Secret Sauce Concept paper Start small Phone management Governance Revisions along the way Luck: life favors the prepared
    24. 24. © 2014 Federal Reserve Bank of St. Louis 24 Timeline 1st session (August 2008) State examiners invited (May 2009) 100th session (March 2010) CEUs offered (January 2011) 250th session February 2012) Mandatory sessions (January 2013) 500th session (estimated August 2014)
    25. 25. © 2014 Federal Reserve Bank of St. Louis 25 Data Over 88,000 total registrations received Over 25,000 surveys received Over 7,000 continuing education units awarded All time average: 93% agree the sessions met their needs First 12 months averaged 5 sessions per month; Last 12 months averaged 9 sessions per month All time average: 90% agree the sessions provide better understanding of banking and regulatory environment Largest session by registration: July 24, 2013: 1,589 All time average: 188 registrations per session Eight core programs with several ad hoc and spin off programs
    26. 26. © 2014 Federal Reserve Bank of St. Louis 26 Current Programs
    27. 27. © 2014 Federal Reserve Bank of St. Louis 27 Have fun with your brand
    28. 28. © 2014 Federal Reserve Bank of St. Louis 28 Questions
    29. 29. © 2014 Federal Reserve Bank of St. Louis 29

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