New Bank Capital Requirements: A Credit Negative and More
When the Federal Reserve and other bank regulators approved changes to the capital requirements for the nation’s largest banks last month it represented the culmination of a years-long campaign by the banking industry to push back on what they viewed as regulatory over-reach. Consumer groups argued otherwise. What’s interesting is not who’s on top at […]
A Bill to Expand Federal Deposit Insurance Would Benefit State and Local Governments
Securing public funds bank deposits is normally not top of mind. Nor is it the prime responsibility of any official—until something goes wrong. When that happens taxpayer money can be lost and municipal officials will be on the hotseat. That was the case in Oklahoma when a small bank became insolvent last year. The Federal […]
Is Monetary Policy Broken?
This may appear to be a bit wonky for some public funds investors who have more important things on their minds but bear with me. The implications of a breakdown in monetary policy are dire for investment markets and for the macroeconomy. The headlines for next week’s Federal Open Market Committee meeting will be about […]
Cracks Are Appearing in the Credit Markets
Cracks are appearing in the credit markets and public funds investors should amp up risk management efforts or avoid the risks that could upend portfolio strategies at a time when economic uncertainty, falling short term interest rates and disruption to historic government funding could stress state and local government budgets. There are two stories here: […]
Bank CDs: Available for Investment, But is There Value?
States and localities have long invested in bank certificates of deposit because they are familiar, easy to acquire and may be viewed as serving the community. In most cases the issuing bank must collateralize the deposit, so CDs are viewed as having low risk. But changes in the bank business model may have made this […]
The Upcoming FOMC Meeting: Lower Rates Likely
The October meeting of the Federal Open Market Committee is likely to produce two results that will lower rates for public funds investors. • The Fed seems set to lower its main policy rate by 25 basis points. Rates for short-term investments like Treasury bills, commercial paper and collateralized certificates of deposit have already dropped […]
What to Expect in a Government Shutdown
I have no idea what the outcome of the government shutdown will be. There is no predicting, and any forecasts are laden with political overtones. But it seems useful to look back at the effects of the last prolonged shutdown, December 2018-January 2019, to see how the economy and financial markets responded. That shutdown lasted […]
State and Local Government Investment Assets Show Growth Despite Economic and Fiscal Uncertainty
State and local government investment assets grew by $110 billion, to $4.1 trillion in the second quarter of 2025, a surprisingly strong pace given the high level of economic and political uncertainty. • The growth of three percent in the quarter and eight percent in the 12-month period extends a trend of expanding investment assets […]
Why the Yield on the 10-Year Treasury Matters
There are several reasons to keep a close eye on the yield of the 10-year Treasury note even though investing out 10 years is far beyond the horizon for most public funds portfolios. Ten-year Treasuries make up less than one percent of Treasury’s $37 trillion of outstanding debt. Yet the yield on this maturity has […]
Cliff Notes on the Upcoming Federal Open Market Committee Meeting
Next week’s meeting of the Federal Open Market Committee is almost certain to set short-term interest rates firmly on the road to lower. That much is given. But it will also mark the debut of a new, more political Fed and provide important guidance for investors to assess the forward path of the U.S. (and […]