Week of August 21, 2011 thru August 27, 2011

UPDATE:Trichet:Idea Europe Has Liquidity Problem'Plain Wrong'

By Steven K. Beckner

JACKSON HOLE, Wyo. (MNI) - European Central Bank President Jean
Claude Trichet insisted Saturday that the euro-area does not face a
liquidity problem.

Trichet, answering questions at the Kansas City Federal Reserve
Bank's annual Jackson Hole symposium, also reemphasized the ECB's
commitment to price stability and said that its anchoring of inflation
expectations have kept European interest rate levels low, irrespective
of yield spreads among European nations.

Some participants thought Trichet might have been rejecting a

Trichet: Unconv'l Mon Pols Needne't Interfere W/Price Stab

By Steven K. Beckner

JACKSON HOLE, Wyo. (MNI) - European Central Bank President Jean
Claude Trichet suggested Saturday that the ECB needs to keep
unconventional monetary policy weapons in its arsenal at a time of
economic weakness, saying that they need not interfere with its price
stability objective.

Trichet, addressing the Kansas City Federal Reserve Bank's annual
Jackson Hole symposium, did not say what more the ECB might need to do
in terms of monetary stimulus, but observed that a "large and persistent

IMF's Lagarde: World Econ 'In Dangerous New Phase'; Act Now

By Steven K. Beckner

JACKSON HOLE, Wyo. (MNI) - Sounding alarmed, the head of the
International Monetary Fund said Saturday that the world economy has
entered a "dangerous new phase" and called for urgent action to sustain
a flagging global recovery.

While advanced countries need to reduce their government debts,
they must not do so in a way that hurts their already "fragile"
economies, said IMF Managing Director Christine LaGarde, who also said
monetary policies must remain "highly accommodative."

She said central banks should be ready to resume "unconventional"

Bank of Mexico's Carstens: Fin Crisis to Keep US Econ Weak

By Steven K. Beckner

JACKSON HOLE, Wyo. (MNI) - Agustin Carstens, governor of the Bank
of Mexico, said Saturday that the economic experience of his country
since the "peso crisis" of the mid-1990s suggests that the United States
is likely in for a long period of slow growth.

Carstens, commenting during a session of the Kansas City Federal
Reserve Bank's annual Jackson Hole symposium, said his country's
financial crisis has had lingering economic aftereffects and predicted
the U.S. financial crisis is apt to have a similar impact on the U.S.

Jackson Hole: G20 Insurance Pool Proposed As Debt Risks Mount

By Steven K. Beckner

JACKSON HOLE, Wyo. (MNI) - Faced with "serious risks" to global
stability from heavily indebted countries which cannot be fully insured
against through massive foreign exchange reserve accumulation, the Group
of 20 should launch an "insurance pool," central bankers from around the
world were told Saturday.

Emerging market countries have solved most of the problems that
dogged them during the Asia Crisis of the late 1990s, but are now
increasingly vulnerable to shocks from advanced nations like the United

Jackson Hole:G20 Insurance Pool Proposed, Debt Risks Mount -2

By Steven K. Beckner

Prasad proposes that "the level of the premium would depend not
only on the level of insurance desired but also the quality of a
country's policies. There would be higher premiums for a country that
chose to run large budget deficits or that accumulated large amounts of
debt, increasing its vulnerability to crises."

"The premiums would increase in a nonlinear fashion with the
persistence and levels of policies that contributed to an economy's
vulnerability," he goes on. "A country running large budget deficits or

Jackson Hole: New Bank Reg'ns, Cap'l Standards Could Backfire

By Steven K. Beckner

JACKSON HOLE, Wyo. (MNI) - The benefits of more government
regulation and higher capital standards have frequently been extolled in
wake of the financial crisis, but those benefits are not automatic and
could be offset by adverse effects, according to a paper presented to
top Federal Reserve officials and economists here Saturday.

Brown University Professor Ross Levine, a research associate with
the National Bureau of Economic Research, contends that increased
regulation and ostensibly more restrictive capital standards can

Jackson Hole: New Bank Reg'ns,Cap Standards Could Backfire -2

By Steven K. Beckner

Levine also suggests that strengthened capital regulations are not
the guarantor of financial stability than many perceive them to be.

"Tightening capital regulations will not necessarily improve the
asset allocation decisions of banks and promote economic growth," he
writes. "While many analysts look to capital regulations as a sort of
policy panacea for all that ails banks, research suggests that the
impact of increasing capital requirements will differ across countries
with different nonbanks and securities markets and across banks with

Fed: To Hold Public Hearings On Cap One/ING Merge Proposal

WASHINGTON (MNI) - The following was issued late Friday by the
Federal Reserve:

The Federal Reserve Board on Friday announced that it will hold
three public meetings on the notice by Capital One Financial
Corporation, McLean, Virginia, to acquire ING Bank, Wilmington,
Delaware, and indirectly to acquire shares of Sharebuilder Advisors,
LLC, and ING Direct Investing, Inc., both of Seattle, Washington
(collectively, ING). The Federal Reserve Board also announced that it
is extending the period for public comment on the proposal through
Wednesday, October 12.

TheFXSpot: Bernanke Pleases; Up Next, Trichet and US Jobs Data

By Vicki Schmelzer

NEW YORK, Aug 26 (MNI) - In the end, Federal Reserve Chairman
Ben Bernanke offered the market a Goldilocks speech that was "just
right," and neither "too hot" nor "too cold."