Tisch Says Fed ‘Woefully’ Late to Halt Penalty of Low Rates

  • Lifting rates `should have been done years ago,' Tisch says
  • Tisch says Trump is not his preference for U.S. president

The Federal Reserve is years too late in lifting U.S. interest rates, a delay that’s hurting economic growth, Loews Corp. Chief Executive Officer James Tisch said.

“I think that the Fed has been woefully behind the curve in waiting to raise rates,” Tisch said Tuesday in a Bloomberg Television interview. “It should have been done years ago.”

Traders of federal funds futures expect lift-off from near-zero, where the benchmark lending rate has been since 2008, at the central bank’s policy-setting meeting that convenes Dec. 15-16 in Washington. San Francisco Fed President John Williams has said there’s a “strong case” for raising rates this month, assuming U.S. economic data continues to be encouraging.
“Interest rates are too low. That causes a mis-allocation of capital,” Tisch said, citing risky loans tied to energy exploration. “Rising interest rates will actually help the economy. Remember, low interest rates penalize a lot of people -- people that live on fixed incomes.”
CNA Financial Corp., the insurer majority owned by Loews, had more than $40 billion of fixed-maturity securities as of Sept. 30, or most of its investment portfolio. CNA competes with insurers including American International Group Inc., which is facing pressure from activist investor Carl Icahn to split into three separate companies.

AIG Views

Tisch agreed with Icahn’s view that shrinking AIG could reduce regulatory costs tied to its status as a non-bank systemically important financial institution. The Loews CEO is also a director at General Electric Co., which has been selling assets to exit the SIFI designation that applies to its finance arm.

However, there are some benefits to the scope of AIG’s operations, according to Tisch.

“There are businesses that counterbalance other businesses within AIG, and that dynamic is actually very important for the entire AIG,” Tisch said.

He also discussed politics. While Tisch didn’t disclose a favorite candidate for president, he said he prefers that the winner of the election be someone other than Donald Trump.
“We need someone who can bring us all together,” Tisch said. “And I just don’t see that Donald Trump is capable of doing that.”

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