Madison notes

It was his first speech on the economy in almost three years in office, but Daniel Tarullo did not pull any punches. The Federal Reserve Board governor, who tends to focus primarily on regulation, on Thursday called for the central bank to step up its purchases of mortgage bonds: I believe we should move back up toward the top of the list of options the large-scale purchase of additional mortgage-backed securities (MBS), something the FOMC first did in November 2008 and then in greater amounts beginning in March 2009 in order to provide more support to mortgage lending and housing markets. More broadly, Tarullo made a strong call for further monetary easing, arguing quite dovishly that the recovery is still too weak for the central bank not to take further action. There is need, and ample room, for additional measures to increase aggregate demand in the near to medium term, particularly in light of the limited upside risks to inflation over the medium term. Tarullo’s rather unexpected push for “large-scale” MBS buys shows just how varied a range of approaches to unconventional monetary policy the Fed is considering as its ultra-easy monetary policy fails to spur growth rapid enough to put a dent in the 9.1 percent unemployment rate. Other doves on the Committee, like Eric Rosengren at the Boston Fed and Charles Evans in Chicago, are calling for more explicit policy targets that tie the path of policy to inflation and unemployment rates. Not that mortgage-backed securities purchases are a new idea. The Fed bought about $1.25 trillion of them as part of its quantitative easing measures. It also revived the program in a smaller form in September, when it decided to reinvest principal payments on maturing mortgage and agency bonds back into real estate finance. But until recently, a large-scale MBS program appeared to have been ruled out, particularly given the internal opposition against the purchases made in 2008-2009. Just this week, Jeffrey Lacker, a regional Fed president who rotates into a voting seat on the Federal Open Market Committee next year, said the central bank should potentially be thinking about tightening policy, not easing further. And he questioned the idea that agency-backed mortgage bonds would have the intended effect: I recognize the potential value of reducing retail mortgage rates by reducing the spread between AMBS and Treasuries. But doing so will cause an offsetting increase in the rates charged to other borrowers, and it’s not obvious whether the net effect on borrowing or growth will be positive or negative. More broadly, it’s simply inappropriate, in my view, for a central bank to attempt to channel credit toward some economic sectors and away from others.

“I apologize to those whom are disappointed in this decision…  But I believe that they, when they take a step back, will understand why the decision was made and understand that really you don’t need a title to make a difference in this country,”  Sarah Palin said on Fox New after closing the door to a 2012 presidential campaign. The former Alaska governor, and 2008 Republican vice presidential nominee, ended months and months of speculation on Wednesday by announcing her decision not to throw her hat into the ring. While she isn’t hitting the trail as a White House candidate, Palin clearly intends to remain a player on the political stage. “In the coming weeks I will help coordinate strategies to assist in replacing the president, re-taking the Senate and maintaining the House,” she said in a statement posted on  Facebook. She also says she’ll continue “driving the discussion for freedom and free market.” Some Highlights from Palin’s  flirtation with 2012 presidential race: September 3, 2011 – Palin wows Tea Party of America rally in Indianola, Iowa, with what sounds like a campaign stump speech. It was widely anticipated that she’d use the speech to announce her candidacy.  Two days later, she gave a speech at a Tea Party Express Rally  in Manchester, New Hampshire. August 12, 2011 – Palin makes a surprise stop at the Iowa State Fair in Des Moines — scheduled neatly between a debate between declared Republican contenders and the Ames straw poll. It was her second high-profile trip of the summer to Iowa. June 28, 2011 – Palin attends premiere of “The Undefeated,” a flattering documentary about her at the opera house in Pella, Iowa. She said she was still studying a potential presidential run, although her daughter said she had already made up her mind. May 27, 2011 – Palin’s political action committee releases a video announcing her  “One Nation” campaign-style bus tour . The tour  stirs  speculation that she might be preparing to jump into the race. Less than a month later, the bus was parked on what Real Clear Politics reported was an extended pit stop. May 29, 2011 -  Palin rolls into Washington on a Harley-Davidson for the annual Rolling Thunder rally to honor veterans, fueling speculation about a White House run. Jan 12, 2011 -Palin accuses critics of “blood libel” for linking fiery campaign rhetoric to a mass shooting in Tucson in which Arizona Representative Gabrielle Giffords was severely wounded. Her eight-minute video is posted on YouTube on the same day President Obama  delivers an address at a service honoring victims of the  shooting. November 14, 2010 - Palin’s  reality TV series  “Sarah Palin’s Alaska” premieres on cable television’s  “The Learning Channel.” September 28, 2010 – Palin is in the audience in a Los Angeles studio to support daughter Bristol, a contestant on ABC’s “Dancing With the Stars.” September 17, 2010 -  Palin speaks at the Iowa Republican Party’s Ronald Reagan Dinner in Des Moines as her influence among Tea Party activists is on the rise. August 29, 2010 - Palin joins Fox TV host Glenn Beck for a “Restoring Honor” rally at the Lincoln Memorial urging a return to what they said were traditional American values of service to others and a belief in God. June 23, 2010 -  Palin’s  “Mama Grizzlies” video is uploaded on  YouTube.  It looks  and sounds  like a political campaign ad –  “Look out Washington, because there’s a whole stampede of pink elephants crossing and the e.t.a. for them stampeding through is November 2, 2010,” Palin says in the video. It raises questions about whether she intends to run for president. November 18, 2009 – Palin opens cross-country tour promoting her memoir “Going Rogue: An American Life.” July 3, 2009 - Palin resigns as Alaska’s governor with 18 months left in her term. Her decision, announced in a statement in her home town of Wasilla, Alaska, fuels  speculation that she might be positioning herself for a presidential run in 2012. January 2009 - Palin’s  political action committee, SarahPAC, is launched “dedicated to building America’s future by supporting fresh ideas and candidates who share our vision for reform and innovation.”   Photo Credits: (Palin at Tea Party rally in Indianola, Iowa; at Iowa State Fair); (Palin at Rolling Thunder); (Palin at Tea Party Express rally in Boston, April 2010); (Palin’s books ‘Going Rouge’ in a Michigan bookstore)

“I apologize to those whom are disappointed in this decision…  But I believe that they, when they take a step back, will understand why the decision was made and understand that really you don’t need a title to make a difference in this country,”  Sarah Palin said on Fox New after closing the door to a 2012 presidential campaign. The former Alaska governor, and 2008 Republican vice presidential nominee, ended months and months of speculation on Wednesday by announcing her decision not to throw her hat into the ring. While she isn’t hitting the trail as a White House candidate, Palin clearly intends to remain a player on the political stage. “In the coming weeks I will help coordinate strategies to assist in replacing the president, re-taking the Senate and maintaining the House,” she said in a statement posted on  Facebook. She also says she’ll continue “driving the discussion for freedom and free market.” Some Highlights from Palin’s  flirtation with 2012 presidential race: September 3, 2011 – Palin wows Tea Party of America rally in Indianola, Iowa, with what sounds like a campaign stump speech. It was widely anticipated that she’d use the speech to announce her candidacy.  Two days later, she gave a speech at a Tea Party Express Rally  in Manchester, New Hampshire. August 12, 2011 – Palin makes a surprise stop at the Iowa State Fair in Des Moines — scheduled neatly between a debate between declared Republican contenders and the Ames straw poll. It was her second high-profile trip of the summer to Iowa. June 28, 2011 – Palin attends premiere of “The Undefeated,” a flattering documentary about her at the opera house in Pella, Iowa. She said she was still studying a potential presidential run, although her daughter said she had already made up her mind. May 27, 2011 – Palin’s political action committee releases a video announcing her  “One Nation” campaign-style bus tour . The tour  stirs  speculation that she might be preparing to jump into the race. Less than a month later, the bus was parked on what Real Clear Politics reported was an extended pit stop. May 29, 2011 -  Palin rolls into Washington on a Harley-Davidson for the annual Rolling Thunder rally to honor veterans, fueling speculation about a White House run. Jan 12, 2011 -Palin accuses critics of “blood libel” for linking fiery campaign rhetoric to a mass shooting in Tucson in which Arizona Representative Gabrielle Giffords was severely wounded. Her eight-minute video is posted on YouTube on the same day President Obama  delivers an address at a service honoring victims of the  shooting. November 14, 2010 - Palin’s  reality TV series  “Sarah Palin’s Alaska” premieres on cable television’s  “The Learning Channel.” September 28, 2010 – Palin is in the audience in a Los Angeles studio to support daughter Bristol, a contestant on ABC’s “Dancing With the Stars.” September 17, 2010 -  Palin speaks at the Iowa Republican Party’s Ronald Reagan Dinner in Des Moines as her influence among Tea Party activists is on the rise. August 29, 2010 - Palin joins Fox TV host Glenn Beck for a “Restoring Honor” rally at the Lincoln Memorial urging a return to what they said were traditional American values of service to others and a belief in God. June 23, 2010 -  Palin’s  “Mama Grizzlies” video is uploaded on  YouTube.  It looks  and sounds  like a political campaign ad –  “Look out Washington, because there’s a whole stampede of pink elephants crossing and the e.t.a. for them stampeding through is November 2, 2010,” Palin says in the video. It raises questions about whether she intends to run for president. November 18, 2009 – Palin opens cross-country tour promoting her memoir “Going Rogue: An American Life.” July 3, 2009 - Palin resigns as Alaska’s governor with 18 months left in her term. Her decision, announced in a statement in her home town of Wasilla, Alaska, fuels  speculation that she might be positioning herself for a presidential run in 2012. January 2009 - Palin’s  political action committee, SarahPAC, is launched “dedicated to building America’s future by supporting fresh ideas and candidates who share our vision for reform and innovation.”   Photo Credits: (Palin at Tea Party rally in Indianola, Iowa; at Iowa State Fair); (Palin at Rolling Thunder); (Palin at Tea Party Express rally in Boston, April 2010); (Palin’s books ‘Going Rouge’ in a Michigan bookstore)

Pacific Investment Management Co. said the Total Return Fund, run by Bill Gross who holds the title of co-chief investment officer of the Newport Beach, Calif. firm, increased exposure to mortgages in September to 38 percent from 32 percent in August.Equally noticeable was the Total Return Fund’s dramatic drop in cash equivalents and money market securities of negative 19 percent in September from negative 9 percent in August, the website showed.PIMCO officials declined to comment.The $245 billion Total Return fund did not adjust its exposure in its Government-Treasury category, which includes U.S. Treasury notes, bonds, futures and inflation-protected securities.It remained at 16 percent for a second consecutive month as of the end of September, the PIMCO website said. The fund held 10 percent as of the end of July.In late August, Gross said the precipitous decline in Treasury yields reflected a high probability of recession. The yield on the benchmark 10-year U.S. Treasury note then dropped below 2 percent to 1.98 percent.On Tuesday, the 10-year yield stood at 2.16 percent.Last week, Reuters asked Mohamed El-Erian, who shares the title of co-chief investment officer with Gross, if the United States was in a recession. He answered with one word: “Yes.”