An Update on Bank Regulations: The Dead Parrot Sketch*
If there were any doubt, the resignation last week of Michael Barr as vice chair for supervision of the Federal Reserve signals that the effort to tighten capital and supervision rules for banks is dead. Barr was the point person in this effort, and in post-election comments he and Federal Reserve chair Jerome Powell had […]
Welcome to 2025, the Year of Heightened Uncertainty
A new year often brings uncertainty but for public funds investors the start of 2025 stands out. On top of the usual questions about financial market trends a couple of things amplify ambiguity. While all investors are subject to these forces, public sector investors are particularly vulnerable. States and localities count on Washington for about […]
Waiting for the Fed
Next week’s meeting of the Federal Open Market Committee will set the tone for the markets for the next several months. In one sense it may be a non-event: investors have coalesced around the view that the central bank will cut the main policy rate by 25 basis points to 4.25-4.50%. This would push government-oriented […]
Uncertain Times: Liquidity May Be More Valuable Now than Ever
Investment managers often talk about the cost of excess liquidity. But liquidity may also have value. The value can be realized as ready cash to make up for unplanned shortfalls in revenue or acceleration in spending , or to take advantage of a rise in interest rates that increases earnings potential from re-investments. Liquidity management […]
The Next Chapter: Three Post-Election Policy Moves that Should Command Your Attention
With the election over, here is a quick flyover of three policy moves that could alter the playing field for state and local government investors: Crypto. Years of hype. rocketing (and volatile) returns on some crypto assets and pressure from the tech industry have brought crypto to the main stage, even if their utility in […]
Hole in the Bucket? State and Local Government Portfolio Growth Slows and May be Pressured by Rate Declines
If you are managing (or overseeing) public funds these days, you might feel as if you are tending a bucket with a hole in it. With interest rates at their highest level in decades earnings are flowing into portfolios at a strong rate. But Federal Reserve data show asset growth recently has slowed. The reason? […]
PFII Files Comments with FDIC Urging Reform of Insurance for Public Agencies
Earlier this week we filed formal comments with the Federal Deposit Insurance Corporation advocating for reform of the bank insurance program to raise limits on insurance and reduce the need for collateral to secure public deposits. The filing, in response to an FDIC Request for Information, is accessible here. Raising the limit for public units […]
Research Note: Why Some investors May Choose an LGIP in a Declining Interest Rate Market
Cash has been king for the past three years as rising interest rates boosted LGIP and money fund returns and depressed returns on longer duration investments like short term Treasury notes. Now that the Federal Reserve has shifted its policy to reducing rates there is a view that keeping large cash balances in an LGIP […]
Slow Progress: The Opportunity to Expand FDIC Insurance for Public Units
In the aftermath of last year’s bank crisis there were calls to reform federal deposit insurance to add stability to the banking system and diminish the risk of runs on smaller community banks. Deposit reform could also improve the banking environment for state and local governments if they organize around this issue and raise their […]
What the Big Bond Market Rally Means for Public Funds Investors
Last week’s big decline in interest rates feels a lot more real than the similar move at the beginning of the year. If so, what does it mean for public funds investors? The rally in bond prices boosted the returns on our 1–3-year model portfolio ahead of cash returns for the first time in several […]