Greenspan put
The Greenspan put was a monetary policy response to financial crises that Alan Greenspan, former chair of the Federal Reserve, exercised beginning with the crash of 1987. Successful in addressing various crises, it became controversial as it led to periods of extreme speculation led by Wall Street investment banks overusing the put's repurchase agreements (or "indirect" quantitative easing) and creating successive asset price bubbles. The banks so overused Greenspan's tools that their compromised solvency in the global financial crisis required Fed Chairman Ben Bernanke to use "direct" quantitative easing (the Bernanke put). The term Yellen put  was used to refer to the Fed chair Janet Yellen's policy of perpetual monetary looseness (i.e. low interest rates and continual quantitative easing). In Q4 2019, Fed Chairman Jerome Powell recreated the Greenspan put by providing repurchase agreements to Wall Street investment banks as a way to boost falling asset prices; in 2020, to combat the financial effects of the COVID-19 pandemic, Powell re-introduced the Bernanke put with "direct" quantitative easing to boost asset prices. In November 2020, "Bloomberg" noted the Powell put was stronger than both the Greenspan put or the Bernanke put, while "Time" noted the  scale of Powell's monetary intervention in 2020 and the tolerance of multiple asset bubbles as a side-effect of such intervention, "is changing the Fed forever." While the specific individual tools have varied between each genre of "put", collectively they are often referred to as the Fed put. In late 2014, concern grew about the emergence of a so-called everything bubble due to overuse of the Fed put and perceived "simultaneous" pricing bubbles in most major US asset classes. By late 2020, under Powell's chair the perceived everything bubble had reached an extreme level due to unprecedented  monetary looseness by the Fed, which simultaneously sent most major US asset classes (i.e. equities, bonds, housing, and commodities) to prior peaks — and beyond in some cases — of historical extreme valuation, and created a highly speculative market. Overview. Naming. The term "Greenspan put" is a play on the term put option, which is a financial instrument that creates a contractual obligation giving its holder the right to sell an asset at a particular price to a counterparty, regardless of what is the prevailing market price of the asset, thus providing a measure of insurance to the holder of the put  against falls in the price of the asset. While Greenspan did not offer such a contractual obligation, under his chair, the Federal Reserve taught markets that when a crisis arose and stock markets fell, the Fed would engage in a series of monetary tools, mostly via Wall Street investment banks, that would cause the stock market falls to reverse. The actions were also referred to as "backstopping" markets. Tools. The main tools used by the "Greenspan put" were: Repurchase agreements (also called, "repos") are a form of "indirect" quantitative easing, whereby the Fed prints the new money, but unlike "direct  quantitative easing, the Fed does not buy the assets for its own balance sheet, but instead lends the new money to investment banks who themselves purchase the assets. Repos allow the investment banks to make both capital gains on the assets purchased (to the extent the banks can sell the assets to the private markets at higher prices), but also the economic carry, being the annual dividend or coupon from the asset, less the interest cost of the repo. When the balance sheets of investment banks became very stressed during the global financial crisis, due to excessive use of repos	Greenspan put
11173321	, Fed had to by-pass the banks and employ direct" quantitative easing; the "Bernanke put" and the "Yellen put" used mostly "direct" quantitative easing, whereas the "Powell put" used both "direct" and "indirect" forms. Use. The Fed first engaged in this activity after the 1987 stock market crash, which prompted traders to coin the term Greenspan put. The Fed also acted to avert further market declines associated with the savings and loan crisis, the Gulf War and the Mexican crisis. However, the collapse of Long Term Capital Management in 1998, which coincided with the 1997 Asian Financial Crisis, led to  such a dramatic expansion of the Greenspan Put that it created the Dot-com bubble. After the collapse of the internet bubble, Greenspan amended the tools of the Greenspan Put to focus on buying mortgage-backed securities, as a method of more directly stimulating house price inflation, until that market collapsed in the Global Financial Crisis and Greenspan retired. Side-effects. A number of adverse side-effects have been identified from the "Greenspan put" (and the other "Fed puts"), including: Variations. Bernanke put. During the 2008–2010 global financial crisis, the term "Bernanke put" was invoked to refer to the series  of major monetary actions of the then Chair of the Federal Reserve, Ben Bernanke. Bernanke's actions were similar to the "Greenspan put" (e.g. reduce interest rates, offer repos to banks), with the explicit addition of "direct" quantitative easing (that included both Treasury bonds and mortgage-backed securities) and at a scale that was unprecedented in the history of the Fed. Bernanke attempted to scale back the level of monetary stimulus in June 2010 by bringing QE1 to a close, however, global markets collapsed again and Bernanke was forced to introduce a second program in November 2010 called QE2. He  was also forced to execute a subsequent third longer-term program in September 2012 called QE3. The markets had become so over-leveraged from decades of the "Greenspan put," that they did not have the capacity to fund US government spending without asset prices collapsing (i.e. investment banks had to sell other assets to buy the new US Treasury bonds). In 2018, Fed Chair Jerome Powell attempted to roll-back part of the "Bernanke put" for the first time and reduce the size of the Fed's balance in a process called quantitative tightening, with a plan to go from  US$4.5 trillion to US$2.5–3 trillion within 4 years, however, the tightening caused global markets to collapse again and Powell was forced to abandon his plan. Yellen put. The term "Yellen put" refers to the Fed Chair Janet Yellen, but appears less frequently as Yellen only faced one material market correction during her tenure, in Q1 2016, where she directly invoked the monetary tools. The term was also invoked to refer to instances where Yellen sought to maintain high asset prices and market confidence by communicating a desire to maintain a continual loose monetary policy (i.e. very low interest  rates and continued quantitative easing). Yellen's continual "implied put" (or perpetual monetary looseness), saw the term "Everything Bubble" emerge. During 2015, "Bloomberg" wrote of Fed monetary policy, "The danger isn't that we're in a unicorn bubble. The danger isn't even that we're in a tech bubble. The danger is that we're in an Everything Bubble – that valuations across the board are simply too high." "The New York Times" wrote that a global "everything boom" had led to a global "everything bubble," which was driven by: "the world's major central banks have been on  a six-year campaign of holding down interest rates and creating more money from thin air to try to stimulate stronger growth in the wake of the financial crisis." As Yellen's term as fed chair came to an end in February 2018, financial writers noticed that several asset classes were simultaneously approaching levels of valuations not seen outside of financial bubbles. Powell put. When Jerome Powell was appointed fed chair in 2018, his initial decision to unwind the Yellen put by raising interest rates and commencing quantitative tightening led to concerns that there might not be a "Powell put ." Powell had to abandon this unwind when markets collapsed in Q4 2018 and his reversal was seen as a first sign of the Powell Put. As markets waned in mid-2019, Powell recreated the Greenspan Put by providing large-scale "repurchase agreements" to Wall Street investment banks as a way to boost falling asset prices and a fear that the "Everything Bubble" was about to deflate; this was seen as confirmation that a "Powell Put" would be invoked to artificially sustain high asset prices. By the end of 2019, US stock valuations reached valuations not seen since 1999 and so extreme  were the valuations of many large US asset classes that Powell's Put was accused of re-creating the "Everything Bubble". In 2020, to combat the financial effects of the COVID-19 pandemic and the bursting of the "Everything Bubble" Powell added the tools of the Bernanke put with significant amounts of "direct" quantitative easing to boost falling prices, further underlying the Powell put. So significant was the Powell put that in June 2020, "The Washington Post" reported that "The Fed is addicted to propping up the markets, even without a need" and further elaborating with: In August 2020, "Bloomberg" called  Powell's policy response to the COVID-19 pandemic "exuberantly asymmetric" (echoing Alan Greenspan's "irrational exuberance" quote from 1996) and profiled research showing that the Fed's balance sheet was now strongly correlated to being used to rescue falling share prices or boosting flagging share prices, but that it was rarely used to control extreme stock price valuations (as the US market was then experiencing in August 2020). In November 2020, "Bloomberg" noted the "Powell put" was now more extreme than the Greenspan put or Bernanke put. "Time" noted that the scale of Powell's monetary intervention in 2020 and  the tolerance of multiple asset bubbles as a side-effect of such intervention "is changing the Fed forever." In January 2021, the former Deputy Governor of the Bank of England Sir Paul Tucker called Powell's actions a "supercharged version of the Fed put" and noted that it was being applied to all assets simultaneously: "It's no longer a Greenspan Put or a Bernanke Put or a Yellen Put. It's now the Fed Put and it's everything." Everything Bubble in 2020. By December 2020, Powell's monetary policy, measured by the Goldman Sachs US Financial Conditions Index  (GSFCI), was the loosest in the history of the GSFCI and had created simultaneous asset bubbles across most of the major asset classes in the United States: For example, in equities, in housing and in bonds. Niche assets such as cryptocurrencies saw dramatic increases in price during 2020 and Powell won the 2020 "Forbes Person of the Year in Crypto". In December 2020, Fed Chair Jerome Powell invoked the "Fed model" to justify high market valuations, saying: "If you look at P/Es they're historically high, but in a world where the risk-free rate is going to be  low for a sustained period, the equity premium, which is really the reward you get for taking equity risk, would be what you'd look at." The creator of the Fed model, Dr. Yardeni, said the Fed's financial actions during the pandemic could form the greatest financial bubble in history. In December 2020, "Bloomberg" noted "Animal spirits are famously running wild across Wall Street, but crunch the numbers and this bull market is even crazier than it seems." CNBC host Jim Cramer said market created by the Fed in late 2020 was "the most speculative" he had ever seen . On 29 December 2020, the "Australian Financial Review" wrote that "The 'everything bubble' is back in business." On 7 January 2021, former IMF deputy director Desmond Lachman wrote that the Fed's loose monetary policy had created an "everything market bubble" in markets that matched that of 1929. On 24 January 2021, "Bloomberg" reported that "Pandemic-Era Central Banking Is Creating Bubbles Everywhere" and called it the "Everything Rally," noting that other major central bankers including Haruhiko Kuroda at the BOJ, had followed Powell's strategy. "Bloomberg" noted that "Powell, Bank of Japan Governor Haruhiko Kuroda and other leading central  bankers, though taken to task about bubbles in markets in recent months, have played down the concerns. In contrast, the "Financial Times" reported that the People's Bank of China issued a bubble warning on 26 January 2021 for several asset classes including equities and housing and started the process of withdrawing liquidity (i.e. the reverse of a Fed put) through its open market operations.