Central Banking
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Episode 155
Featuring Bill Nelson
Demetri Kofinas speaks with Bill Nelson, Chief Economist of BPI and a former deputy director of the Division of Monetary Affairs at the Federal Reserve Board who helped design and manage several of the Fed’s emergency liquidity facilities during the 2008 crisis.

In Episode 155 of Hidden Forces, Demetri Kofinas speaks with Bill Nelson, Chief Economist & Executive Vice President at the Bank Policy Institute, who spent most of his career working at the Federal Reserve, with a brief stint at the Bank For International Settlements. 

Before joining BPI, Dr. Nelson served as a deputy director of the Division of Monetary Affairs at the Federal Reserve Board and actually helped design and manage several of the Fed’s emergency liquidity facilities during the 2008 crisis. 

Dr. Nelson’s expert understanding of the plumbing of our monetary system and how monetary policy is effectuated at the ground level is important because, despite all the ways in which the Fed has sought to increase transparency and further communication with the public over the years, the mechanics of monetary policy remain baffling to most people. Even those of us who think we understand how it works are often only scratching the surface.

 Consequently, one of the items we discuss in this episode is how monetary policy has changed operationally since the 2008 crisis -- how a combination of regulations introduced by Basel III and Dodd-Frank, as well as emergency actions taken by the Fed during the financial crisis explain some of what we are seeing in markets today.

We also discuss inflation and inflation expectations, as well as credible threats to the Fed’s independence given how far it’s gone in expanding its balance sheet and in purchasing corporate bonds and corporate bond ETFs. In addition, we look at what it would take for the Fed to bring out “the Bazooka” as Bill Nelson refers to it, and what that Bazooka would look like. Would it include equities, and if so, how would Fed officials justify those purchases? Lastly, what type of language should we be focused on? What types of signs should we be looking for that might give us a hint that we are about to enter a new phase of policy action?

You can access the episode overtime, as well as the transcript and rundown to this week’s episode through the Hidden Forces Patreon Page. All subscribers gain access to our overtime feed, which can be easily added to your favorite podcast application.

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Producer & Host: Demetri Kofinas

Editor & Engineer: Stylianos Nicolaou

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Episode Recorded on 09/16/2020

Bill Nelson is an Executive Vice President and Chief Economist at the Bank Policy Institute. Previously he served as Executive Managing Director, Chief Economist, and Head of Research at the Clearing House Association and Chief Economist of the Clearing House Payments Company.

Prior to joining The Clearing House in 2016, Mr. Nelson was a deputy director of the Division of Monetary Affairs at the Federal Reserve Board where his responsibilities included monetary policy analysis, discount window policy analysis, and financial institution supervision. Mr. Nelson attended Federal Open Market Committee meetings and regularly briefed the Board and FOMC. He was a member of the Large Institution Supervision Coordinating Committee (LISCC) and the steering committee of the Comprehensive Liquidity Analysis and Review (CLAR). He has chaired and participated in several BIS working groups on the design of liquidity regulations and most recently chaired the CGFS-Markets Committee working group on regulatory change and monetary policy. In 2007 and 2008, Bill visited the Bank for International Settlements, in Basel, Switzerland, where his responsibilities included analyzing central banks’ responses to the financial crisis and researching the use of forward guidance by central banks. He returned to the Board in the fall of 2008 where he helped design and manage several of the Federal Reserve’s emergency liquidity facilities.

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