Buffett calls Federal Reserve the greatest hedge fund ever

The Fed is the greatest hedge fund in history. It’s generating $80 billion or $90 billion a year probably in revenue for the U.S. government. And that wasn’t the case a few years back. The Fed is under no pressure, none whatsoever to have to deleverage. So it can pick its time, and if you have somebody wise there -- and I think Bernanke is wise, and I certainly expect his successor to be -- it can be handled. But it is something that’s never quite been done on this scale. It will be interesting to watch.

~ Warren Buffett, Bloomberg, September 20, 2013

Time reporter Justin Fox on Irving Fisher's prescription for the 1930s bust

For all its flaws, [Irving] Fisher's economic approach delivered genuinely important insights. He proposed in 1911 that the government issue inflation-linked bonds; in 1997, the Treasury Department finally got around to doing so. If anybody in power in Washington had been willing to follow his advice in 1930 or '31 (which essentially amounted to "Print more money"), the Great Depression might not have been so great. For the past two years, the Federal Reserve has been working right out of the Fisher playbook, and while the results haven't been perfect, they've been a lot better than those of the early 1930s.

~ Justin Fox, Time, "The Myth of the Rational Market," June 22, 2009

Irving Fisher sees no crash in stock prices (1929)

There may be a recession in stock prices, but not anything in the nature of a crash.  Dividend returns on stocks are moving higher.  This is not due to receding prices for stocks, and will not be hastened by any anticipated crash, the possibility of which I fail to see.

A few years ago people were as much afraid of common stocks as they were of a red-hot poker. In the popular mind there was a tremendous risk in common stocks. Why? Mainly because the average investor could afford to invest in only one common stock. Today he obtains wide and well managed diversification of stock holding by purchasing shares in good investment trusts.

~ Irving Fisher, September 5, 1929 (two days after the peak of the bull market according to Robert Murphy, author of The Politically Incorrect Guide to the Great Depression and the New Deal)

Fed Governor Randall Kroszner: "US commercial banks are strongly capitalized" (2007)

Effective banking supervision has helped foster a banking system . . . that today is safe, sound and well-capitalized . . . US commercial banks are strongly capitalized, reflecting years of robust profits.

~ Fed Governor Randall Kroszner, September 2007

Fed Governor Kevin Warsh: "We don't see any immediate systemic risk issues" (2007)

We don't see any immediate systemic risk issues. . . . The most important providers of market discipline are the large, global commercial and investment banks.

~ Fed Governor Kevin Warsh, July 2007

Ben Bernanke on housing bubble talk (2005)

Well, unquestionably housing prices are going up quite a bit, but I would note that the fundamentals are very strong – a growing economy, jobs, incomes . . . much of what has happened [with home prices] was supported by the strength of the economy.

~ Ben Bernanke, CNBC, July 2005

San Francisco Fed President: Stocks are not overvalued

If you look at the valuation of stocks today compared to earnings and dividends and relative to historical averages, it’s not obvious that the stock market is overvalued, in fact a lot of models will tell you that it’s undervalued given how strong profits have been.

~ John Williams, president, Federal Reserve Bank of San Francisco, November 5, 2013

(Comments made in a press roundtable following the Asia Economic Policy Conference.)