Market Angry About Yellen's "Is NIRP Legal" Confusion

Tyler Durden's picture

Just as we detailed last week, and it appears Rep. Hensarling has been reading... To wit:

 
 

"There are several potentially substantial legal and practical constraints to implementing a negative IOER rate regime, some of which would be binding at any IOER rate below zero, even a rate just slightly below zero. Most notably, it is not at all clear that the Federal Reserve Act permits negative IOER rates, and more staff analysis would be needed to establish the Federal Reserve’s authority n this area."

No legal authority? No problem. Just call in Mario Draghi's lawyer, or any other legal representative of Goldman Sachs and/or its former employees, and whatever amendments need to be made to the Federal Reserve Act, will be made.

Because, when pressed on The Fed's legal authority to take interest rates negative, Janet Yellen gushed that "Fed authority for negative rates is still a question." This appears to have been taken as bad news by the market (cutting off the potential easing paths of the future in a world of NIRP), and stocks, crude, USDJPY have all tumbled.

 

Furthermore, she sounded a little hawkish:

  • *YELLEN: I DON'T EXPECT THE FOMC WILL FACE RATE-CUT OPTION SOON
  • YELLEN: I DON'T THINK IT WILL BE NECESSARY TO CUT RATES

The reaction - more disappointment... as USDJPY crashes...

 

It is clear that her NIRP confusion has carry traders concerned as USDJPy plunges. As BofA details,

We previously recommended selling USD/JPY above 120.88 given the "Kuroda" oversold bounce. The move has quickly occurred and for this week we can estimate closing support of the 100wk average and cloud of 114.71-114.98. This area has been broken intraweek.

 

 

Holding it by the end of week would be an indication of a possible bounce next week. Breaking it and the trend may accelerate to levels shown on the next page of 114.35, 113.03 and 111.90.

Bear in mind that one week before The Bank of Japan unleashed NIRP, they also denied it would do so:

 

And then did it...

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hedgeless_horseman's picture

 

 

Our lawmakers will make it legal, like torture, imprisonment without a speedy trial, etc., etc., etc.

glenlloyd's picture

Oh yeah, no doubt about that. It's never stopped them on anything before....

hedgeless_horseman's picture

 

 

Don't forget unlimited bribery of a public official.

...or infringing the right to bear arms that shall not be infringed.

tmosley's picture

Surely Granny wouldn't lie to us!

ParkAveFlasher's picture

What is the meaning of "is"?

The9thDoctor's picture

NIRP is "legal" because the Federal Reserve is above the law.

If NIRP is implemented, what the f**k is Congress, the President, or the Supreme Court going to do about it? Absolutely nothing! They won't do a damn thing about it. They are all blackmailed by the NSA data collection even if they wanted to do something about it.

The Fed can do whatever the hell they want, and nobody is going to stop them.

thesonandheir's picture

US Congress is a joke, THEY are supposed to be the ones in charge not her!

 

FFS

Occident Mortal's picture

The law is for the little people.

 

Aint that right Hillary?

spastic_colon's picture

the fact that the markets only react to this type of rhetoric only further exposes the fraud of the markets.......no one is even talking about this fact.

eatthebanksters's picture

Fucking politicians!  Maybe Obozo and congress should get their shit together on spending and fiscal policy instead of going after Yellen...fuck, as much as I'm not a fan of hers she can't do it all herself.  The pols want her to save them from making unpopular decisions...fuck the political class!!!!  Time to throw the bastards out!!!!!

Son of Loki's picture

"is this legal?"

 

... cracks me up.

jcaz's picture

The Fed authority questioning their own authority?  What a crock of posing shit........

Kefeer's picture

What a joke and it is on us; the Supreme Court will have a hell of good time after the verdict is rendered on them in THE SUPREME COURT.

KnuckleDragger-X's picture

In an election year? I don't see it happening and the death spiral will accelerate, no matter what.......

Kefeer's picture

Why not; the best time to let to monster crash is now so you can then coronate King Obama; the yesiest of the yes boys.

KnuckleDragger-X's picture

Sanders and Trump are two reasons why not and Wall St. doesn't want to be front and center. Plus most congress critters are cowards......

slaughterer's picture

The speculative hogwash about NIRP is overinflated.  Why not just another bout of old-school QE madness?  At least, old Yeller can consult her legal team overnight and clarify tomorrow.  She f*cks it up today, and then gives the market what it wants tomorrow.  After a nice plunge in ES.

The9thDoctor's picture

The talk about NIRP is getting the Overton Window ready.

Moar QE and going back to ZIRP will keep a stock market rally going for 9 more months.

The Fed has to kick the can until the boomers die off.

LawsofPhysics's picture

Listen slaughterer, if the Fed wants to pay me to take out a billion dollar loan, LET THEM!!!

Isn't that what is meant by negative interest rates?

/s

Look, we all know precisely how the ongoing "let the majority eat cake" monetary experiment will turn out, get it over with already.

EscapeKey's picture

remember the ECB on QE? a QE program used to be "illegal" for the ECB to commit to... until they found a convenient loophole.

this wil be exactly the same.

Hitlery_4_Dictator's picture

1. Just go NIRP, we all know you are going to do it anyway.

2. The "markets" are doing just fine - DOW up +72

3. Stop the charade it's getting old

4. Anything that happened 2 days ago, yesterday or today is not short covering.

5. Sit on my middle finger and spin.

ejmoosa's picture

Gotta do something!  Even if it is the wrong thing to do.

thunderchief's picture

Lets face it.

These markets need a lethal injection of 100 percent pure heroin.  

Unlimited money..

The high  will be everything to die for.

Nothing else will do.

abyssinian's picture

"Yellen was subpoenaed but did not comply" put that clueless C**t in jail now!

yrad's picture

The FED worried about "legality" is a fucking joke!!!

ParkAveFlasher's picture

It's a gesture towards the courts.  A provocation or a beckoning, or both.  "We shall fund you, if..."

herkomilchen's picture

A tenured federal judgeship with lifetime salary, benefits, pension is "a fucking valuable thing, you just don't give it away for nothing."

LawsofPhysics's picture

Yep, off with their heads already!!!

KnuckleDragger-X's picture

The markets are insane, and apparently suicidal...just dandy.......

Lady Jessica's picture

Haven't markets got better things to do than parse the mumbled utterances of the High Priestess?

papaswamp's picture

...hasn't been operating on sound economics for the last 7 yrs...why not?

KnuckleDragger-X's picture

Algo's can read, but not think, just like your average "investor".......

Groundhog Day's picture

NIRP to the rescue...Gold to 3000

papaswamp's picture

Nothing like telling an addict the dealer might run out of product...

buzzsaw99's picture

Major here has told me what your troubles are. I've been thinking it over and in light of my forty years experience in legal jurisprudence, I have come to the positive conclusion that there ain't no way to do this legal and honest... but being good sensible Texans (i.e. bankers), we'll do it illegal and dishonest! [/Circuit Court Judge Thaddeus Jackson Breen, The Comancheros]

Boris Badenov's picture

Illegal or unconstitutional, it won't stop the Fed. They know there is no enforcement against Banksterz in this country.

jakesdad's picture

I believe it was al gore who gave us the phrase:  "no controlling legal authority"

Son of Loki's picture

Barry's appointee Loretta is too busy indicting European soccer officials and investigating police departments to be bothered with these financial peeple destroying America.

 

Well, on the bright side at least she's not handing assault rifles to the Mexican drug gangs ... as far as we know.

jakesdad's picture

she should have channeled her inner-hillary & said:  "what difference does it make?"

Bill of Rights's picture

Well that sure cleaned the noise up.... Lol ridiculous.

Dr. Engali's picture

Since when do legalities matter to these people?

rejected's picture

You nailed that one Doc!  One up for you...

herkomilchen's picture

I like how buzzsaw caputured it a little better.

buzzsaw99's picture

congress has passed laws suspending habeas corpus, condoning torture, wiretaps, spying, searches, wars, etc., confiscation of personal property including cash, etc., i think they can find a way to make nirp "legal".

Haole's picture

WTF does any "rule of law" have to do with any of this?

Chuckster's picture

Does anyone think this governement or the Fed gives a shit about laws?  Laws are for us serfs.  Hillary and Oby will straighten all this out.

Kefeer's picture

The solution is to allow the banks to fail and all other bad businesses and break up the monopolies and get rid of corporate lobbyist and begin taxpayer funding of political campaigns; everyone gets "x amount" and no more or no less. 

 

Nah, never mind that would mean the use of integrity, honesty and justice...that is not in our DNA to act upon; only passing thoughts from time to time.