Think Tanks
Here's a look at documents from think tanks
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Ifo Institute: Somewhat Fewer Companies in Germany Planning Price Increases
MUNICH, Germany, Sept. 2 -- ifo Institute issued the following news release on Sept. 1, 2026:
* * *
Somewhat Fewer Companies in Germany Planning Price Increases
In August, somewhat fewer companies in Germany planned to raise their prices. The ifo price expectations dropped to 21.2 points, down from 21.6* in July. This points to a slight easing in price pressure over the next three months. However, crude oil prices and, in particular, market prices for natural gas and electricity have risen significantly again since the start of August.
"The longer the war in the Middle East continues and energy ... Show Full Article MUNICH, Germany, Sept. 2 -- ifo Institute issued the following news release on Sept. 1, 2026: * * * Somewhat Fewer Companies in Germany Planning Price Increases In August, somewhat fewer companies in Germany planned to raise their prices. The ifo price expectations dropped to 21.2 points, down from 21.6* in July. This points to a slight easing in price pressure over the next three months. However, crude oil prices and, in particular, market prices for natural gas and electricity have risen significantly again since the start of August. "The longer the war in the Middle East continues and energyprices remain high, the sharper the rise in consumer prices for food, services, and goods is also likely to be in the medium term, as companies pass on the increased costs with a delay," says ifo researcher Tiphaine Wibault.
In August, price expectations declined in many sectors of the economy. Among energy-intensive companies, the indicator fell from 21.3* to 18.7 points, and among non-energy-intensive companies from 22.7* to 19.0 points. In trade, companies also lowered their price expectations slightly in August, from 31.4* to 30.0 points. By contrast, price expectations among service providers increased slightly, from 19.1* to 20.9 points.
Overall, inflation is likely to remain high for the coming months. In 2026, the inflation rate is expected to be 2.8 percent and to rise to 3.0 percent in 2027. The impact of the energy price shock on the core rate (inflation excluding energy) is likely to be felt only after a delay. It is expected to rise by 2.2 percent this year and 2.9 percent next year.
*Seasonally adjusted
* * *
Further Information
Survey (https://www.ifo.de/en/facts/2026-09-01/somewhat-fewer-companies-germany-planning-price-increases)
* * *
Original text here: https://www.ifo.de/en/press-release/2026-09-01/somewhat-fewer-companies-germany-planning-price-increases
[Category: ThinkTank]
* * *
Somewhat Fewer Companies in Germany Planning Price Increases
In August, somewhat fewer companies in Germany planned to raise their prices. The ifo price expectations dropped to 21.2 points, down from 21.6* in July. This points to a slight easing in price pressure over the next three months. However, crude oil prices and, in particular, market prices for natural gas and electricity have risen significantly again since the start of August.
"The longer the war in the Middle East continues and energy ... Show Full Article MUNICH, Germany, Sept. 2 -- ifo Institute issued the following news release on Sept. 1, 2026: * * * Somewhat Fewer Companies in Germany Planning Price Increases In August, somewhat fewer companies in Germany planned to raise their prices. The ifo price expectations dropped to 21.2 points, down from 21.6* in July. This points to a slight easing in price pressure over the next three months. However, crude oil prices and, in particular, market prices for natural gas and electricity have risen significantly again since the start of August. "The longer the war in the Middle East continues and energyprices remain high, the sharper the rise in consumer prices for food, services, and goods is also likely to be in the medium term, as companies pass on the increased costs with a delay," says ifo researcher Tiphaine Wibault.
In August, price expectations declined in many sectors of the economy. Among energy-intensive companies, the indicator fell from 21.3* to 18.7 points, and among non-energy-intensive companies from 22.7* to 19.0 points. In trade, companies also lowered their price expectations slightly in August, from 31.4* to 30.0 points. By contrast, price expectations among service providers increased slightly, from 19.1* to 20.9 points.
Overall, inflation is likely to remain high for the coming months. In 2026, the inflation rate is expected to be 2.8 percent and to rise to 3.0 percent in 2027. The impact of the energy price shock on the core rate (inflation excluding energy) is likely to be felt only after a delay. It is expected to rise by 2.2 percent this year and 2.9 percent next year.
*Seasonally adjusted
* * *
Further Information
Survey (https://www.ifo.de/en/facts/2026-09-01/somewhat-fewer-companies-germany-planning-price-increases)
* * *
Original text here: https://www.ifo.de/en/press-release/2026-09-01/somewhat-fewer-companies-germany-planning-price-increases
[Category: ThinkTank]
Hudson Institute Issues Commentary to Washington Times: Dangerous Delusion of Quiet Diplomacy With China
WASHINGTON, Sept. 2 -- Hudson Institute, a research organization that says it promotes leadership for a secure, free and prosperous future, issued the following commentary on Sept. 1, 2026, by Miles Yu, director and senior fellow of the China Center, to the Washington Times:
* * *
The Dangerous Delusion of Quiet Diplomacy with China
Few modern US doctrines have produced so few results.
-
For more than half a century, American statesmen have been told that the most delicate business with the communists who rule China must be conducted quietly.
Do not embarrass Beijing. Allow its leaders to ... Show Full Article WASHINGTON, Sept. 2 -- Hudson Institute, a research organization that says it promotes leadership for a secure, free and prosperous future, issued the following commentary on Sept. 1, 2026, by Miles Yu, director and senior fellow of the China Center, to the Washington Times: * * * The Dangerous Delusion of Quiet Diplomacy with China Few modern US doctrines have produced so few results. - For more than half a century, American statesmen have been told that the most delicate business with the communists who rule China must be conducted quietly. Do not embarrass Beijing. Allow its leaders to"save face." Trust private assurances. Above all, keep talking behind closed doors.
Few doctrines in modern American diplomacy have produced so much credulity with so little to show for it.
The record of quiet diplomacy should have discredited it long ago. Beijing made solemn promises regarding World Trade Organization obligations and market access, the South China Sea's non-militarization, Hong Kong's autonomy, human rights, intellectual property, cyber activities, international norms and more.
Again and again, the promises were broken, evaded or reinterpreted once Beijing secured what it wanted. Again and again, Washington received another private assurance -- and Beijing pocketed another public advantage.
Quiet diplomacy survived because it has created its own constituency: a professional class of China brokers whose influence depends on the proposition that Beijing remains one discreet conversation away from moderation.
Wall Street wants market access. Silicon Valley wants customers and supply chains. K Street discovers clients. Universities want Chinese money, students and access. Think tanks acquired programs, consultants and "distinguished fellows." Former officials and has-been politicians discovered that Beijing could provide something Washington could no longer: relevance.
Thus emerges one of the strangest features of the U.S.-China relationship: Americans explaining to other Americans why the Chinese Communist Party must not be offended.
Beijing hardly needs to lobby Washington directly when prominent Americans do the work for it.
This ecosystem has also produced the Blame-America-first China expert, for whom Chinese aggression can usually be traced to something Washington did to make Beijing insecure.
China militarizes the South China Sea? America provoked it. Beijing threatens Taiwan? Washington failed to reassure it. The People's Liberation Army expands? The Pentagon started an arms race.
There is always context for Beijing and culpability for Washington.
The habit of self-deception goes back to the opening of China itself. President Nixon and Henry Kissinger achieved an important strategic breakthrough, but they also helped establish a style of personalized, secretive diplomacy in which Beijing enjoyed extraordinary control over the setting, interpretation and information.
Consequential conversations with Mao Zedong and Zhou Enlai were conducted exclusively through Chinese interpreters trusted by the communist leadership, including Nancy Tang and Wang Hairong, Mao's personal interpreters and bedroom Barbarian handlers, rather than the usual American diplomatic interpreters.
The CCP's senior interpreters are not merely linguistic technicians but well-indoctrinated, sophisticated political insiders serving the communist regime. When one side exercises disproportionate control over interpretation, opportunities to shade nuance, frame concepts and exploit ambiguity are obvious.
Ambiguity mattered. What did "China" mean? What did Washington promise Beijing regarding Taiwan? What constituted sovereignty?
These distinctions became the vocabulary of disputes that lasted for generations.
No American president should conduct consequential diplomacy with a CCP leader behind closed doors in a controlled-information environment without capable American interpreters, note takers, experts and a precise institutional record. The fate of nations should never depend on whether an American leader believes he has established a special relationship with the man across the table.
CCP leaders are exceptionally skilled at encouraging exactly that illusion.
They stage-manage encounters with ceremonial grandeur, banquets and carefully selected proverbs. Communist apparatchiks suddenly appear as philosopher-kings dispensing 5,000 years of Chinese wisdom. Foreign visitors are frequently enchanted. Chinese people, however, are often befuddled and far less impressed.
Many supposedly profound aphorisms delivered to foreigners are ordinary expressions dressed for diplomatic export. The performance recalls the political satire film "Being There," in which Chance, the gardener, says banal things about plants and seasons while sophisticated people convince themselves that they are hearing profound observations about economics and civilization.
The CCP has perfected the geopolitical version of Chance the Gardener.
Jiang Zemin famously demonstrated his erudition before foreigners by reciting President Lincoln's Gettysburg Address, a Leninist dictator displaying his sophistication by quoting one of history's greatest statements of government "of the people, by the people, for the people."
Xi Jinping often displays an uncontrollable desire to be regarded by foreign leaders as intellectually monumental and culturally erudite, while domestically, he is widely lampooned as a clueless, vacuous Pooh with a tragically hopeless gaffe machine.
One wonders whether the greater absurdity belongs to Mr. Jiang and Mr. Xi -- or to the Western audiences impressed by their performance.
The same credulity underlies the Western obsession with Chinese "face." We are warned that public criticism will humiliate Beijing because Chinese culture supposedly places extraordinary importance on avoiding embarrassment. This is presented as cultural sophistication. Too often, it is paternalism.
Chinese people are not exotic, premodern creatures who must be protected from embarrassment by enlightened Western custodians. More important, the men ruling Beijing are not Confucian sages nursing ancient sensitivities. They are officials of a Marxist-Leninist party commanding nuclear weapons, intelligence services, propaganda organs and the world's largest military.
Indeed, explaining CCP behavior as "Chinese culture" gets history backward. Marxism-Leninism is not an ancient Chinese inheritance. It is a radical Western ideology imported into China and imposed through a Leninist party-state.
Treating Leninism as Chinese culture is one of the West's most persistent -- and patronizing -- analytical tragedies.
Quiet diplomacy also frightens America's friends. When an American leader disappears behind closed doors with a CCP general secretary, Taiwan, Japan, South Korea, the Philippines, Australia and others naturally wonder what Washington might concede at their expense. Even when no concession occurs, secrecy breeds uncertainty, and uncertainty among allies is itself a strategic victory for Beijing.
None of this means that America should stop talking to China. Nuclear powers must communicate, and some negotiations require confidentiality.
Still, confidentiality is a diplomatic technique. It should never become a diplomatic theology.
The presumption should be transparency. Important understandings should be written down. Capable American interpreters should be present. Allies should be consulted. Chinese promises should be recorded publicly whenever possible, and violations should be publicly exposed.
Private assurances should count for nothing until matched by observable behavior.
Above all, Washington should stop worrying so much about embarrassing the CCP. Embarrassment can be useful.
A dictatorship that spends enormous resources censoring information, imprisoning critics, rewriting history and operating a gigantic propaganda apparatus is telling us something important: Truth and transparency are vulnerabilities of the regime.
Sunlight does what another elegant dinner in Beijing cannot: It raises the price of lying, reassures allies and denies Beijing the ability to tell different stories to different audiences.
For more than 50 years, American diplomacy has too often assumed that the CCP becomes more reasonable when nobody is watching. The evidence suggests precisely the opposite.
Behind closed doors, Beijing can flatter, intimidate, reinterpret, divide and promise. In public, it must answer for what it has actually done.
The CCP rarely yields to whispers behind closed doors; it yields when the truth is exposed, when diplomacy is conducted transparently, and when the cost of defiance becomes unbearable. History has yet to prove otherwise.
Read in the Washington Times (https://www.washingtontimes.com/news/2026/aug/31/dangerous-delusion-quiet-diplomacy-china/).
* * *
Miles Yu is a senior fellow and director of the China Center at Hudson Institute. He is also a professor of East Asia and military and naval history at the United States Naval Academy in Annapolis, Maryland. Dr. Yu specializes in Chinese military and strategic culture, US and Chinese military and diplomatic history, and US policy toward China.
* * *
Original text here: https://www.hudson.org/foreign-policy/dangerous-delusion-quiet-diplomacy-china-miles-yu
[Category: ThinkTank]
* * *
The Dangerous Delusion of Quiet Diplomacy with China
Few modern US doctrines have produced so few results.
-
For more than half a century, American statesmen have been told that the most delicate business with the communists who rule China must be conducted quietly.
Do not embarrass Beijing. Allow its leaders to ... Show Full Article WASHINGTON, Sept. 2 -- Hudson Institute, a research organization that says it promotes leadership for a secure, free and prosperous future, issued the following commentary on Sept. 1, 2026, by Miles Yu, director and senior fellow of the China Center, to the Washington Times: * * * The Dangerous Delusion of Quiet Diplomacy with China Few modern US doctrines have produced so few results. - For more than half a century, American statesmen have been told that the most delicate business with the communists who rule China must be conducted quietly. Do not embarrass Beijing. Allow its leaders to"save face." Trust private assurances. Above all, keep talking behind closed doors.
Few doctrines in modern American diplomacy have produced so much credulity with so little to show for it.
The record of quiet diplomacy should have discredited it long ago. Beijing made solemn promises regarding World Trade Organization obligations and market access, the South China Sea's non-militarization, Hong Kong's autonomy, human rights, intellectual property, cyber activities, international norms and more.
Again and again, the promises were broken, evaded or reinterpreted once Beijing secured what it wanted. Again and again, Washington received another private assurance -- and Beijing pocketed another public advantage.
Quiet diplomacy survived because it has created its own constituency: a professional class of China brokers whose influence depends on the proposition that Beijing remains one discreet conversation away from moderation.
Wall Street wants market access. Silicon Valley wants customers and supply chains. K Street discovers clients. Universities want Chinese money, students and access. Think tanks acquired programs, consultants and "distinguished fellows." Former officials and has-been politicians discovered that Beijing could provide something Washington could no longer: relevance.
Thus emerges one of the strangest features of the U.S.-China relationship: Americans explaining to other Americans why the Chinese Communist Party must not be offended.
Beijing hardly needs to lobby Washington directly when prominent Americans do the work for it.
This ecosystem has also produced the Blame-America-first China expert, for whom Chinese aggression can usually be traced to something Washington did to make Beijing insecure.
China militarizes the South China Sea? America provoked it. Beijing threatens Taiwan? Washington failed to reassure it. The People's Liberation Army expands? The Pentagon started an arms race.
There is always context for Beijing and culpability for Washington.
The habit of self-deception goes back to the opening of China itself. President Nixon and Henry Kissinger achieved an important strategic breakthrough, but they also helped establish a style of personalized, secretive diplomacy in which Beijing enjoyed extraordinary control over the setting, interpretation and information.
Consequential conversations with Mao Zedong and Zhou Enlai were conducted exclusively through Chinese interpreters trusted by the communist leadership, including Nancy Tang and Wang Hairong, Mao's personal interpreters and bedroom Barbarian handlers, rather than the usual American diplomatic interpreters.
The CCP's senior interpreters are not merely linguistic technicians but well-indoctrinated, sophisticated political insiders serving the communist regime. When one side exercises disproportionate control over interpretation, opportunities to shade nuance, frame concepts and exploit ambiguity are obvious.
Ambiguity mattered. What did "China" mean? What did Washington promise Beijing regarding Taiwan? What constituted sovereignty?
These distinctions became the vocabulary of disputes that lasted for generations.
No American president should conduct consequential diplomacy with a CCP leader behind closed doors in a controlled-information environment without capable American interpreters, note takers, experts and a precise institutional record. The fate of nations should never depend on whether an American leader believes he has established a special relationship with the man across the table.
CCP leaders are exceptionally skilled at encouraging exactly that illusion.
They stage-manage encounters with ceremonial grandeur, banquets and carefully selected proverbs. Communist apparatchiks suddenly appear as philosopher-kings dispensing 5,000 years of Chinese wisdom. Foreign visitors are frequently enchanted. Chinese people, however, are often befuddled and far less impressed.
Many supposedly profound aphorisms delivered to foreigners are ordinary expressions dressed for diplomatic export. The performance recalls the political satire film "Being There," in which Chance, the gardener, says banal things about plants and seasons while sophisticated people convince themselves that they are hearing profound observations about economics and civilization.
The CCP has perfected the geopolitical version of Chance the Gardener.
Jiang Zemin famously demonstrated his erudition before foreigners by reciting President Lincoln's Gettysburg Address, a Leninist dictator displaying his sophistication by quoting one of history's greatest statements of government "of the people, by the people, for the people."
Xi Jinping often displays an uncontrollable desire to be regarded by foreign leaders as intellectually monumental and culturally erudite, while domestically, he is widely lampooned as a clueless, vacuous Pooh with a tragically hopeless gaffe machine.
One wonders whether the greater absurdity belongs to Mr. Jiang and Mr. Xi -- or to the Western audiences impressed by their performance.
The same credulity underlies the Western obsession with Chinese "face." We are warned that public criticism will humiliate Beijing because Chinese culture supposedly places extraordinary importance on avoiding embarrassment. This is presented as cultural sophistication. Too often, it is paternalism.
Chinese people are not exotic, premodern creatures who must be protected from embarrassment by enlightened Western custodians. More important, the men ruling Beijing are not Confucian sages nursing ancient sensitivities. They are officials of a Marxist-Leninist party commanding nuclear weapons, intelligence services, propaganda organs and the world's largest military.
Indeed, explaining CCP behavior as "Chinese culture" gets history backward. Marxism-Leninism is not an ancient Chinese inheritance. It is a radical Western ideology imported into China and imposed through a Leninist party-state.
Treating Leninism as Chinese culture is one of the West's most persistent -- and patronizing -- analytical tragedies.
Quiet diplomacy also frightens America's friends. When an American leader disappears behind closed doors with a CCP general secretary, Taiwan, Japan, South Korea, the Philippines, Australia and others naturally wonder what Washington might concede at their expense. Even when no concession occurs, secrecy breeds uncertainty, and uncertainty among allies is itself a strategic victory for Beijing.
None of this means that America should stop talking to China. Nuclear powers must communicate, and some negotiations require confidentiality.
Still, confidentiality is a diplomatic technique. It should never become a diplomatic theology.
The presumption should be transparency. Important understandings should be written down. Capable American interpreters should be present. Allies should be consulted. Chinese promises should be recorded publicly whenever possible, and violations should be publicly exposed.
Private assurances should count for nothing until matched by observable behavior.
Above all, Washington should stop worrying so much about embarrassing the CCP. Embarrassment can be useful.
A dictatorship that spends enormous resources censoring information, imprisoning critics, rewriting history and operating a gigantic propaganda apparatus is telling us something important: Truth and transparency are vulnerabilities of the regime.
Sunlight does what another elegant dinner in Beijing cannot: It raises the price of lying, reassures allies and denies Beijing the ability to tell different stories to different audiences.
For more than 50 years, American diplomacy has too often assumed that the CCP becomes more reasonable when nobody is watching. The evidence suggests precisely the opposite.
Behind closed doors, Beijing can flatter, intimidate, reinterpret, divide and promise. In public, it must answer for what it has actually done.
The CCP rarely yields to whispers behind closed doors; it yields when the truth is exposed, when diplomacy is conducted transparently, and when the cost of defiance becomes unbearable. History has yet to prove otherwise.
Read in the Washington Times (https://www.washingtontimes.com/news/2026/aug/31/dangerous-delusion-quiet-diplomacy-china/).
* * *
Miles Yu is a senior fellow and director of the China Center at Hudson Institute. He is also a professor of East Asia and military and naval history at the United States Naval Academy in Annapolis, Maryland. Dr. Yu specializes in Chinese military and strategic culture, US and Chinese military and diplomatic history, and US policy toward China.
* * *
Original text here: https://www.hudson.org/foreign-policy/dangerous-delusion-quiet-diplomacy-china-miles-yu
[Category: ThinkTank]
Hudson Institute Issues Commentary to Wall Street Journal Entitled 'Realistic Look at the Iran War'
WASHINGTON, Sept. 2 -- Hudson Institute, a research organization that says it promotes leadership for a secure, free and prosperous future, issued the following commentary on Aug. 31, 2026, by Walter Russell Mead, Ravenel B. Curry III distinguished fellow in strategy and statesmanship, to the Wall Street Journal:
* * *
A Realistic Look at the Iran War
It isn't as easy as Trump expected, but don't assume the US has already lost.
-
What President Trump initially heralded as a "four to five weeks" war against Iran entered its seventh month Saturday. Far from winding down, the war intensified ... Show Full Article WASHINGTON, Sept. 2 -- Hudson Institute, a research organization that says it promotes leadership for a secure, free and prosperous future, issued the following commentary on Aug. 31, 2026, by Walter Russell Mead, Ravenel B. Curry III distinguished fellow in strategy and statesmanship, to the Wall Street Journal: * * * A Realistic Look at the Iran War It isn't as easy as Trump expected, but don't assume the US has already lost. - What President Trump initially heralded as a "four to five weeks" war against Iran entered its seventh month Saturday. Far from winding down, the war intensifiedover the past few days.
From the serene heights of the foreign-policy establishment to the fever swamps of the online left and right, a consensus has emerged.
The war is a disaster, the American equivalent of Britain's humiliating defeat in the 1956 Suez crisis.
American power can never recover in the Middle East, and Mr. Trump has suffered the greatest embarrassment of his career.
Read in the Wall Street Journal (https://www.wsj.com/opinion/a-realistic-look-at-the-iran-war-d6af0908).
* * *
Walter Russell Mead is the Ravenel B. Curry III Distinguished Fellow in Strategy and Statesmanship at Hudson Institute, the Alexander Hamilton Professor of Strategy and Statecraft with the Hamilton School for Classical and Civic Education at the University of Florida, and the "Global View" columnist at the Wall Street Journal.
* * *
Original text here: https://www.hudson.org/national-security-defense/realistic-look-iran-war-walter-russell-mead
[Category: ThinkTank]
* * *
A Realistic Look at the Iran War
It isn't as easy as Trump expected, but don't assume the US has already lost.
-
What President Trump initially heralded as a "four to five weeks" war against Iran entered its seventh month Saturday. Far from winding down, the war intensified ... Show Full Article WASHINGTON, Sept. 2 -- Hudson Institute, a research organization that says it promotes leadership for a secure, free and prosperous future, issued the following commentary on Aug. 31, 2026, by Walter Russell Mead, Ravenel B. Curry III distinguished fellow in strategy and statesmanship, to the Wall Street Journal: * * * A Realistic Look at the Iran War It isn't as easy as Trump expected, but don't assume the US has already lost. - What President Trump initially heralded as a "four to five weeks" war against Iran entered its seventh month Saturday. Far from winding down, the war intensifiedover the past few days.
From the serene heights of the foreign-policy establishment to the fever swamps of the online left and right, a consensus has emerged.
The war is a disaster, the American equivalent of Britain's humiliating defeat in the 1956 Suez crisis.
American power can never recover in the Middle East, and Mr. Trump has suffered the greatest embarrassment of his career.
Read in the Wall Street Journal (https://www.wsj.com/opinion/a-realistic-look-at-the-iran-war-d6af0908).
* * *
Walter Russell Mead is the Ravenel B. Curry III Distinguished Fellow in Strategy and Statesmanship at Hudson Institute, the Alexander Hamilton Professor of Strategy and Statecraft with the Hamilton School for Classical and Civic Education at the University of Florida, and the "Global View" columnist at the Wall Street Journal.
* * *
Original text here: https://www.hudson.org/national-security-defense/realistic-look-iran-war-walter-russell-mead
[Category: ThinkTank]
Capital Research Center Issues Report: Enemies of Energy - Sall Family Foundation
WASHINGTON, Sept. 2 (TNSLrpt) -- The Capital Research Center issued the following excerpts of a report on Aug. 31, 2026, by Managing Editor and Director of Content Ken Braun:
* * *
Enemies of Energy: Sall Family Foundation
Editor's note: The following is an excerpt from Enemies of Energy, a research report created for the Capital Research Center.
-
Donor type: direct grant maker
Compared to the other names on this list, the Sall Family Foundation is a relatively modest grant maker, disbursing a combined $35.8 million to all recipients in 2024, the last year IRS filings have been made publicly ... Show Full Article WASHINGTON, Sept. 2 (TNSLrpt) -- The Capital Research Center issued the following excerpts of a report on Aug. 31, 2026, by Managing Editor and Director of Content Ken Braun: * * * Enemies of Energy: Sall Family Foundation Editor's note: The following is an excerpt from Enemies of Energy, a research report created for the Capital Research Center. - Donor type: direct grant maker Compared to the other names on this list, the Sall Family Foundation is a relatively modest grant maker, disbursing a combined $35.8 million to all recipients in 2024, the last year IRS filings have been made publiclyavailable. But what they lack in magnitude, they make up in focus. Thirty percent of those grants, $10.7 million in all for 2024, were sent to four of the anti-energy NGOs profiled in the previous section of this report: [i]
* World Wildlife Fund: $4.8 million
* Rocky Mountain Institute: $2.9 million
* Environmental Defense Fund: $2.5 million
* World Resources Institute: $500,000
The Sall Family Foundation was founded and funded by John and Virginia "Ginger" Sall. According to a Forbes profile, John Sall is the co-founder of SAS, a statistical software firm, and his net worth is estimated to be $6.5 billion--placing him in spot number 192 on the Forbes list of richest Americans.[ii] [iii]
In addition to holding a spot as co-founder on the board at the Sall Family Foundation, Virginia Sall is also listed as a board member at the Environmental Defense Fund. EDF makes the following boast about its board members: "Fortune magazine called our board one of the most influential nonprofit boards in the country." [iv]
* * *
Endnotes
[i] Sall Family Foundation Inc. (EIN: 58-2016050). 2024 IRS Form 990. https://projects.propublica.org/nonprofits/organizations/582016050/202533219349101718/full
[ii] "Our Story." Sall Family Foundation. Accessed April 20, 2026. https://sallfamily.org/
[iii] "John Sall." Forbes. Accessed April 20, 2026. https://www.forbes.com/profile/john-sall/
[iv] "Our Story." Sall Family Foundation. Accessed April 20, 2026. https://sallfamily.org/
"Board of Trustees." Environmental Defense Fund. Accessed April 20, 2026. https://www.edf.org/board-trustees
* * *
Ken Braun
As managing editor and director of content of CRC, Ken Braun edits Capital Research magazine. He also conducts investigative research and drafts profiles for InfluenceWatch.org.
* * *
Report Link: https://capitalresearch.org/app/uploads/FINAL-PDF_CRC_EnemiesofEnergy.pdf
* * *
Original text here: https://capitalresearch.org/article/enemies-of-energy-sall-family-foundation/
[Category: ThinkTank]
* * *
Enemies of Energy: Sall Family Foundation
Editor's note: The following is an excerpt from Enemies of Energy, a research report created for the Capital Research Center.
-
Donor type: direct grant maker
Compared to the other names on this list, the Sall Family Foundation is a relatively modest grant maker, disbursing a combined $35.8 million to all recipients in 2024, the last year IRS filings have been made publicly ... Show Full Article WASHINGTON, Sept. 2 (TNSLrpt) -- The Capital Research Center issued the following excerpts of a report on Aug. 31, 2026, by Managing Editor and Director of Content Ken Braun: * * * Enemies of Energy: Sall Family Foundation Editor's note: The following is an excerpt from Enemies of Energy, a research report created for the Capital Research Center. - Donor type: direct grant maker Compared to the other names on this list, the Sall Family Foundation is a relatively modest grant maker, disbursing a combined $35.8 million to all recipients in 2024, the last year IRS filings have been made publiclyavailable. But what they lack in magnitude, they make up in focus. Thirty percent of those grants, $10.7 million in all for 2024, were sent to four of the anti-energy NGOs profiled in the previous section of this report: [i]
* World Wildlife Fund: $4.8 million
* Rocky Mountain Institute: $2.9 million
* Environmental Defense Fund: $2.5 million
* World Resources Institute: $500,000
The Sall Family Foundation was founded and funded by John and Virginia "Ginger" Sall. According to a Forbes profile, John Sall is the co-founder of SAS, a statistical software firm, and his net worth is estimated to be $6.5 billion--placing him in spot number 192 on the Forbes list of richest Americans.[ii] [iii]
In addition to holding a spot as co-founder on the board at the Sall Family Foundation, Virginia Sall is also listed as a board member at the Environmental Defense Fund. EDF makes the following boast about its board members: "Fortune magazine called our board one of the most influential nonprofit boards in the country." [iv]
* * *
Endnotes
[i] Sall Family Foundation Inc. (EIN: 58-2016050). 2024 IRS Form 990. https://projects.propublica.org/nonprofits/organizations/582016050/202533219349101718/full
[ii] "Our Story." Sall Family Foundation. Accessed April 20, 2026. https://sallfamily.org/
[iii] "John Sall." Forbes. Accessed April 20, 2026. https://www.forbes.com/profile/john-sall/
[iv] "Our Story." Sall Family Foundation. Accessed April 20, 2026. https://sallfamily.org/
"Board of Trustees." Environmental Defense Fund. Accessed April 20, 2026. https://www.edf.org/board-trustees
* * *
Ken Braun
As managing editor and director of content of CRC, Ken Braun edits Capital Research magazine. He also conducts investigative research and drafts profiles for InfluenceWatch.org.
* * *
Report Link: https://capitalresearch.org/app/uploads/FINAL-PDF_CRC_EnemiesofEnergy.pdf
* * *
Original text here: https://capitalresearch.org/article/enemies-of-energy-sall-family-foundation/
[Category: ThinkTank]
Capital Research Center Issues Commentary: Olivia Rodrigo, Charismatic Preacher for the Abortion Movement
WASHINGTON, Sept. 2 -- The Capital Research Center issued the following commentary on Sept. 1, 2026, by senior fellow Kali Fontanilla:
* * *
Olivia Rodrigo, charismatic preacher for the abortion movement
A pop star very popular with teen girls, Rodrigo uses this influence to promote abortions, including the distribution of abortion pills at her concerts. But she's only one part of a larger Planned Parenthood outreach.
-
The Instagram video opens with text on the screen: "Learning that nearly 30 Planned Parenthood health centers have closed since President Trump signed a law 'defunding' Planned ... Show Full Article WASHINGTON, Sept. 2 -- The Capital Research Center issued the following commentary on Sept. 1, 2026, by senior fellow Kali Fontanilla: * * * Olivia Rodrigo, charismatic preacher for the abortion movement A pop star very popular with teen girls, Rodrigo uses this influence to promote abortions, including the distribution of abortion pills at her concerts. But she's only one part of a larger Planned Parenthood outreach. - The Instagram video opens with text on the screen: "Learning that nearly 30 Planned Parenthood health centers have closed since President Trump signed a law 'defunding' PlannedParenthood." Then, pop star Olivia Rodrigo appears, mouthing along to her song "My Way," dancing with a group of women, as the text switches to "But we'll never stop fighting for sexual and reproductive health care!!!" Planned Parenthood posted this to Instagram on August 4. The same day, a second set of clips went up: Rodrigo touring a Los Angeles Planned Parenthood facility, then answering some questions with a Planned Parenthood employee, telling the camera she does not think you need "a PhD" to know women should control their own bodies, and separately describing the abortion drug mifepristone as "very safe."
Instagram is a social media platform used heavily by teen girls who make up a real share of Rodrigo's fanbase. Every movement needs someone willing to carry the message to the masses. Planned Parenthood has found its evangelist, and she has 42 million Instagram followers.
Rodrigo directed a portion of her 2023 Guts concert tour proceeds to a foundation she started called Fund 4 Good. The fund supports reproductive freedom (a nice way for the left to say abortions), girls education, and preventing gender-based violence. The group has donated more than $2 million to organizations around the world.
Rodrigo is a true believer in the church of abortion.
On August 29, she headlined her music festival, Daisy Chain Fields, with each performer, including Chappell Roan, Doechii, and Stevie Nicks, donating their time. The net proceeds from the event were donated to 10 organizations, including Planned Parenthood and the Center for Reproductive Rights.
In 2025, Planned Parenthood gave Rodrigo its Catalyst of Change award. She used the speech to thank the crowds of young girls who fill her shows, then praised Planned Parenthood:
It's a privilege to be here tonight to support an organization that, despite countless obstacles, continues to show up with compassion, hope, and dignity for women. My greatest wish is that through organizations like Planned Parenthood and the action of everyday citizens, no woman will need to sacrifice her dreams, her health, or humanity because of restrictive laws or lack of resources.
Rodrigo's relationship with the pro-abortion movement has already gone further than ads and award shows. During the 2023 Guts tour, the National Network of Abortion Funds set up tables at nearly every North American stop, from Nashville to St. Louis to St. Paul, handing out free Plan B pills, along with condoms, lubrication, and cards offering help finding abortion services.
It was a crowd full of teenagers, but all of this was legal. Plan B has been sold over the counter nationwide with no age restriction and no prescription required since 2013. No ID, no questions asked. The backlash was fast, and Rodrigo's team eventually pulled the tables, not because it was inappropriate in principle, but because, as organizer Jade Hurley told Variety, "children are present at the concerts," an admission that the organizers knew exactly who was in the crowd.
Rodrigo is not the first young celebrity to pioneer abortion evangelism but does seem to have the biggest pulpit yet.
Planned Parenthood has employed a staffer for pop star outreach since the mid-1990s. Her name is Caren Spruch, and according to her account in the Washington Post, she started by asking bands such as Santana and the Dave Matthews Band if Planned Parenthood could set up a table at their concerts. By the late 2010s, the strategy had scaled into a full campaign called Bans Off Our Bodies. Around 140 musicians signed on, including Billie Eilish and Ariana Grande.
Advocates for Youth runs a parallel operation called Abortion Out Loud, recruiting what it calls "youth abortion storytellers," plus an Abortion On Campus project that pushes colleges to fund off-campus abortion trips and stock abortion medication on-site.
Advocates for Youth even trains what it calls "abortion doulas" for young people aged 14-24. This is propaganda that belongs in an Orwell novel. As the Cleveland Clinic notes, a "doula" is "a trained professional who supports you before, during and after you've had a baby."
Britney Spears is one pop princess we probably won't be seeing in this abortion evangelism for young women. She had an abortion at nineteen years old, revealing the secret twenty-three years later in her 2023 memoir. Spears stated she wanted to keep the baby. Her boyfriend at the time, fellow performer Justin Timberlake, did not.
"He said we weren't ready to have a baby in our lives, that we were way too young," she wrote. "If it had been left up to me alone, I never would have done it. And yet Justin was so sure that he didn't want to be a father." Spears called it "one of the most agonizing things I have ever experienced in my life."
There is nothing empowering about being coerced into an abortion by your boyfriend, or convinced into one by a decades-long indoctrination campaign backed by the most popular entertainers in the country. There are women having abortions that may never have happened if they did not have a partner in their ear telling them to get rid of it, a message you likely won't hear about from the supposedly pro-woman abortion lobby or Olivia Rodrigo. It is similarly difficult to find the abortion cheerleaders cheering so enthusiastically about the life-preserving option of placing an unwanted baby up for adoption.
Planned Parenthood did not stumble into Rodrigo. It has spent decades building a pulpit for exactly this moment, one concert table at a time, and she is simply the latest to stand behind it. That message leaves no room for a girl who might want to wait to become sexually active, or for a mother who might want a say in whether her young daughter learns about sex from a folding table at a concert.
* * *
See also:
The business model of the abortion industrial complex (https://capitalresearch.org/article/the-business-model-of-the-abortion-industrial-complex/)
* * *
Kali Fontanilla
Kali is serving as CRC's Senior fellow, particularly focusing on topics related to K-12 public education.
* * *
Original text here: https://capitalresearch.org/article/olivia-rodrigo-charismatic-preacher-for-the-abortion-movement/
[Category: ThinkTank]
* * *
Olivia Rodrigo, charismatic preacher for the abortion movement
A pop star very popular with teen girls, Rodrigo uses this influence to promote abortions, including the distribution of abortion pills at her concerts. But she's only one part of a larger Planned Parenthood outreach.
-
The Instagram video opens with text on the screen: "Learning that nearly 30 Planned Parenthood health centers have closed since President Trump signed a law 'defunding' Planned ... Show Full Article WASHINGTON, Sept. 2 -- The Capital Research Center issued the following commentary on Sept. 1, 2026, by senior fellow Kali Fontanilla: * * * Olivia Rodrigo, charismatic preacher for the abortion movement A pop star very popular with teen girls, Rodrigo uses this influence to promote abortions, including the distribution of abortion pills at her concerts. But she's only one part of a larger Planned Parenthood outreach. - The Instagram video opens with text on the screen: "Learning that nearly 30 Planned Parenthood health centers have closed since President Trump signed a law 'defunding' PlannedParenthood." Then, pop star Olivia Rodrigo appears, mouthing along to her song "My Way," dancing with a group of women, as the text switches to "But we'll never stop fighting for sexual and reproductive health care!!!" Planned Parenthood posted this to Instagram on August 4. The same day, a second set of clips went up: Rodrigo touring a Los Angeles Planned Parenthood facility, then answering some questions with a Planned Parenthood employee, telling the camera she does not think you need "a PhD" to know women should control their own bodies, and separately describing the abortion drug mifepristone as "very safe."
Instagram is a social media platform used heavily by teen girls who make up a real share of Rodrigo's fanbase. Every movement needs someone willing to carry the message to the masses. Planned Parenthood has found its evangelist, and she has 42 million Instagram followers.
Rodrigo directed a portion of her 2023 Guts concert tour proceeds to a foundation she started called Fund 4 Good. The fund supports reproductive freedom (a nice way for the left to say abortions), girls education, and preventing gender-based violence. The group has donated more than $2 million to organizations around the world.
Rodrigo is a true believer in the church of abortion.
On August 29, she headlined her music festival, Daisy Chain Fields, with each performer, including Chappell Roan, Doechii, and Stevie Nicks, donating their time. The net proceeds from the event were donated to 10 organizations, including Planned Parenthood and the Center for Reproductive Rights.
In 2025, Planned Parenthood gave Rodrigo its Catalyst of Change award. She used the speech to thank the crowds of young girls who fill her shows, then praised Planned Parenthood:
It's a privilege to be here tonight to support an organization that, despite countless obstacles, continues to show up with compassion, hope, and dignity for women. My greatest wish is that through organizations like Planned Parenthood and the action of everyday citizens, no woman will need to sacrifice her dreams, her health, or humanity because of restrictive laws or lack of resources.
Rodrigo's relationship with the pro-abortion movement has already gone further than ads and award shows. During the 2023 Guts tour, the National Network of Abortion Funds set up tables at nearly every North American stop, from Nashville to St. Louis to St. Paul, handing out free Plan B pills, along with condoms, lubrication, and cards offering help finding abortion services.
It was a crowd full of teenagers, but all of this was legal. Plan B has been sold over the counter nationwide with no age restriction and no prescription required since 2013. No ID, no questions asked. The backlash was fast, and Rodrigo's team eventually pulled the tables, not because it was inappropriate in principle, but because, as organizer Jade Hurley told Variety, "children are present at the concerts," an admission that the organizers knew exactly who was in the crowd.
Rodrigo is not the first young celebrity to pioneer abortion evangelism but does seem to have the biggest pulpit yet.
Planned Parenthood has employed a staffer for pop star outreach since the mid-1990s. Her name is Caren Spruch, and according to her account in the Washington Post, she started by asking bands such as Santana and the Dave Matthews Band if Planned Parenthood could set up a table at their concerts. By the late 2010s, the strategy had scaled into a full campaign called Bans Off Our Bodies. Around 140 musicians signed on, including Billie Eilish and Ariana Grande.
Advocates for Youth runs a parallel operation called Abortion Out Loud, recruiting what it calls "youth abortion storytellers," plus an Abortion On Campus project that pushes colleges to fund off-campus abortion trips and stock abortion medication on-site.
Advocates for Youth even trains what it calls "abortion doulas" for young people aged 14-24. This is propaganda that belongs in an Orwell novel. As the Cleveland Clinic notes, a "doula" is "a trained professional who supports you before, during and after you've had a baby."
Britney Spears is one pop princess we probably won't be seeing in this abortion evangelism for young women. She had an abortion at nineteen years old, revealing the secret twenty-three years later in her 2023 memoir. Spears stated she wanted to keep the baby. Her boyfriend at the time, fellow performer Justin Timberlake, did not.
"He said we weren't ready to have a baby in our lives, that we were way too young," she wrote. "If it had been left up to me alone, I never would have done it. And yet Justin was so sure that he didn't want to be a father." Spears called it "one of the most agonizing things I have ever experienced in my life."
There is nothing empowering about being coerced into an abortion by your boyfriend, or convinced into one by a decades-long indoctrination campaign backed by the most popular entertainers in the country. There are women having abortions that may never have happened if they did not have a partner in their ear telling them to get rid of it, a message you likely won't hear about from the supposedly pro-woman abortion lobby or Olivia Rodrigo. It is similarly difficult to find the abortion cheerleaders cheering so enthusiastically about the life-preserving option of placing an unwanted baby up for adoption.
Planned Parenthood did not stumble into Rodrigo. It has spent decades building a pulpit for exactly this moment, one concert table at a time, and she is simply the latest to stand behind it. That message leaves no room for a girl who might want to wait to become sexually active, or for a mother who might want a say in whether her young daughter learns about sex from a folding table at a concert.
* * *
See also:
The business model of the abortion industrial complex (https://capitalresearch.org/article/the-business-model-of-the-abortion-industrial-complex/)
* * *
Kali Fontanilla
Kali is serving as CRC's Senior fellow, particularly focusing on topics related to K-12 public education.
* * *
Original text here: https://capitalresearch.org/article/olivia-rodrigo-charismatic-preacher-for-the-abortion-movement/
[Category: ThinkTank]
American Action Forum Issues Insight: Long and Short of It - The Term Structure of Interest Rates
WASHINGTON, Sept. 2 -- The American Action Forum issued the following insight on Sept. 1, 2026, by policy fellow Oren Swagel:
* * *
The Long and the Short of It: The Term Structure of Interest Rates
Executive Summary
* While the Federal Reserve (Fed) is often described as setting interest rates - or the price of borrowing money - it in fact only controls a single short-term interest rate and does not directly control the longer-term rates that matter for economic activity, such as mortgage, credit card, and auto loan rates.
* Nonetheless, the Fed is able to influence these longer-term interest ... Show Full Article WASHINGTON, Sept. 2 -- The American Action Forum issued the following insight on Sept. 1, 2026, by policy fellow Oren Swagel: * * * The Long and the Short of It: The Term Structure of Interest Rates Executive Summary * While the Federal Reserve (Fed) is often described as setting interest rates - or the price of borrowing money - it in fact only controls a single short-term interest rate and does not directly control the longer-term rates that matter for economic activity, such as mortgage, credit card, and auto loan rates. * Nonetheless, the Fed is able to influence these longer-term interestrates by changing its short-term rate; the relationship between short- and long-term interest rates that explains this influence is known as the term structure of interest rates.
* The important question for the economy is therefore to what extent short-term interest rates can influence longer-term rates; this insight reviews the main schools of thought on the term structure of interest rates that attempt to answer this question.
-
Introduction
Interest rates function as the price consumers, businesses, and the government pay to borrow money. While the Federal Reserve (Fed) is often described as controlling interest rates, it in fact controls only a single short-term interest rate, the federal funds rate, which dictates the cost banks face when borrowing money from other banks overnight. By contrast, the Fed does not control the longer-term interest rates that matter for real economic activity, such as those for mortgages, car loans, and credit cards.
Even though the Fed cannot directly control these longer-term rates, it can still influence them by changing its short-term rate. When the Fed raises the federal funds rate, for instance, longer-term rates tend to rise in response. The relationship between short- and long-term interest rates that explain this influence is called the term structure of interest rates.
The important economic question is therefore to what extent movements in short-term interest rates can induce changes in long-term rates. There are multiple schools of thoughts that aim to explain the term structure of interest rates, including the expectations hypothesis, market segmentation, and the preferred habitat theory. First, however, it reviews interest rates, the role of the Fed in setting them, and how they affect consumers. It concludes by reviewing a historical case study from the 2008 global financial crisis (GFC).
Interest Rates, Consumers, and the Federal Reserve
Interest rates may seem complicated; articles and stories discussing them often use financial jargon. For instance, rates are often quoted in basis points, which is just another way of saying 1/100 of a percentage point. (25 basis points, a typical interest rate change from the Fed, is, therefore, .25 percentage points).
Interest rates, however, are just another price in the market, albeit in the money market. Indeed, from the borrower's (buyer's) perspective, they are the cost of borrowing money. From the lender's (seller's) point of view, they are the price charged for lending money. So, for example, if a lender offers to loan $1 to a borrower on the condition that the borrower pays back $1.03 in a year's time, the interest rate (or price) on that loan is 3 percent.
Media reports regarding the Federal Reserve often convey the impression that it wields total control over interest rates; if the Fed raises rates, borrowing money becomes more expensive, and vice-versa if it lowers interest rates. In many ways, this view of the Fed's power is accurate: When the Fed raises rates, borrowing money usually does become more expensive. Unfortunately, this view misses some important details. For starters, there is no single interest rate in the economy. There are mortgage related interest rates (more on these soon), car loan interest rates, and even buy-now-pay-later interest rates that dictate the cost of buying a Chipotle burrito using borrowed money.
One of these many interest rates, the federal funds rate, is the rate that the Fed controls. While the details surrounding the rate changed significantly in the wake of the global financial crisis, it is, for the purposes of this paper, useful to consider the federal funds rate as an extremely short-term - "overnight - interest rate.
Almost all other interest rates correspond to much longer periods than just overnight. Mortgages, for instance, are often made with 30-year timelines, making the associated interest rate a 30-year interest rate. Yet given the role of the Federal Reserve in the country's financial system, the federal funds rate still plays a role in influencing other interest rates in the economy. This influence, however, is not uniform across all interest rates, with longer-term rates often being less influenced by the federal funds rate.
The following two figures can help to visualize the disparate influence of the federal funds rate on long-term interest rates.
Figure 1 shows the federal funds rate and the bank prime loan rate, which is the average interest rate charged by the country's largest banks to their top customers for short-term business loans. Figure 1 highlights two important realities. First, these two rates move together almost in lockstep (indeed, the correlation between the two in Figure 1's sample period is .99993). And second, the level of the bank rate is always higher than the federal funds rate. This gap highlights how the federal funds rate serves only as a baseline for other interest rates, guiding, but not controlling, their values.
Figure 2 plots the federal funds rate, 30-year mortgage rates, and 15-year mortgage rates. Like with the bank rate in Figure 1, there is some co-movement between these three rates. Unlike in Figure 1, however, the three rates clearly do not move in lockstep. Sometimes, they even diverge. For instance, at the end of 2013, mortgage rates spiked even as the federal funds rate was kept near 0. As economists at the Dallas Fed note: "the difference between the 30-year primary mortgage rate and the fed funds target has been as tight as [.7 percentage points] and as wide as" 6 percentage points.
The reduced influence of the federal funds rate on mortgage rates reflects the time and risk difference between borrowing priced by the overnight rate and borrowing priced by decades-long mortgage rates. Economists at the Atlanta Fed explain that, "because the average life of a mortgage is around seven to 10 years," mortgage interest rates "are more strongly linked to longer-term rates such as the [interest rates on] 10- or 20-year" U.S. Treasury debt. While these Treasury debt rates are, in turn, also influenced by the federal funds rate, mortgage markets also factor in "the market's expectation for economic growth, the federal government's fiscal policies on spending and taxation, inflation expectations, lender capacity as homeowners refinance their mortgages, borrowers' credit risk, and so forth." Beyond mortgages, many of these same factors will influence interest rates for all types of lending, such as car loans, municipal debt, and, yes, Chipotle burrito loans.
The Term Structure of Interest Rates and the Yield Curve
If the Fed is limited to changing one short-term interest rate, an important issue for policymakers to understand is the relationship between this short-term rate and the longer-term interest rates (such as mortgages, cars, capital investment by firms) that price the credit that drives economic growth. Economists have come up with multiple frameworks about how short-term interest rates can affect long-term rates.
In developing and understanding these frameworks, economists first look to compare short-term and long-term interest rates for loans that are the same in every way (amount, tax applications, etc.) except for how long the borrower has to repay the loan. This mapping of interest rates to the length of their loan is known as the "term structure."
To visualize the term structure, economists and financial market participants use a yield curve, which is a plot of interest rates for similar loans with different maturities. In their analysis, these individuals typically use the yield curve for U.S. Treasury debt, which, as the most important financial asset, often sets a benchmark for interest rates for other financial assets. Because of this outsized importance, the U.S. Treasury yield curve is typically known as "the yield curve." The plot below shows the yield curve as of August 28, 2026.
Frameworks of the Term Structure: The Expectations Hypothesis
The first view of the term structure is the expectations hypothesis. There are two forms of this hypothesis: pure and unpure. Both forms begin with the same assumptions: (1) every potential loan for a specific type of borrowing is exactly the same except for the length of the loan; (2) the goal of an investor is to maximize profits; and (3) investors, without knowing what short-term interest rates will be in the future, develop expectations of these future rates.
The pure expectations hypothesis further assumes that investors behave as if their expectations are 100 percent going to come true. In other words, investors believe that interest rates in a year, or two, or three, will be exactly what they expect them to be today. The implication of this rock-solid expectation is that the interest rate on a long-term bond "of a given maturity is an average of the current short-term rate and all future expected short rates over the term to maturity." The reason for this implication is that if the interest rate of a bond with maturity of 5 years differed from the average short-term interest rate over the next 5 years, then rock-solidly confident investors could buy the bond with a higher return while selling the bonds with lower interest rates, making off with a huge profit. In buying and selling bonds in this way, however, investors would bid up the price of the bond with higher returns and bid down the price of the bond with lower returns until there is no profit to be made. And since interest rates move inversely with a bond's price, doing this would equalize long-term returns with the average of short-term returns.
The following simple example of the pure expectations hypothesis should further clarify how this framework works. Consider an investor who wants to invest money in bonds for two years and has the choice of investing in 2 1-year bonds or 1 2-year bond. The 1-year interest rate currently stands at 3 percent. The investor expects that next year's 1-year interest rate will rise to 4 percent. If the investor invests in these 2 1-year bonds, he or she can expect to make a total return of 7 percent over two years. (Compounded interest means the return will differ slightly from 7 percent, but this can be abstracted away for simplicity.) On an annual basis, then, the investor will make a 3.5 percent return over 2 years. Consequently, according to the pure expectations hypothesis, the 2-year bond should have an annual interest rate of 3.5 percent to give the investor the same 7 percent return over 2 years.
The unpure expectations hypothesis assumes that investors do not have complete confidence in their interest rate expectations but instead believe there to be some uncertainty around whether their predictions of future short-term interest rates will come true. This version of the hypothesis also assumes that investors are risk averse, meaning that they must be compensated with an extra return for taking on the risk that changes in future interest rates may not be what they currently expect and, therefore, the return they receive may change. The implication of these two assumptions for the term structure is that future interest rates are the sum of the weighted average of current and future short-term interest rates expectations (the pure expectations hypothesis) and a positive risk premium that compensates investors for the risk that their long-term bonds lose value.
To further clarify the implications of the unpure expectations hypothesis, it is worthwhile to return to the simple example above. Previously, the investor expected that next year's 1-year interest rate would be 4 percent and invested money as if that was going to happen no matter what. Now, while the investor still expects that next year's 1-year interest rate will be 4 percent, he or she neither believes nor behaves as if a 4 percent interest rate is an absolute certainty. The investor realizes, for example, that interest rates could in fact rise to 4.1 percent, making the 2-year average interest rate 3.55 percent rather than 3.5 percent. Given this uncertainty, the investor is no longer willing to invest in a 2-year bond at a 3.5 percent interest rate - if next year's 1-year rate rises to 4.1 percent, then a 2-year bond at a 3.5 percent interest rate will be worth less. Instead, even though the investor still expects that next year's interest rate will be 4 percent, he or she is only willing to invest in a 2-year bond if they receive some extra return to compensate for the risk that next year's interest rate is not 4 percent. Consequently, the interest rate on a 2-year bond might be 3.53 percent, which can be decomposed into the 3.5 percent implied by the pure expectations hypothesis and the .03 percent extra return required by the investor to assume the risk that future interest rates might turn out differently from expectations.
It is important to note that there are multiple possible risks that the risk premium could be compensating for, including credit, liquidity, and duration risk. Credit risk is the risk that the borrower does not repay the loan. Liquidity risk represents the fact that longer-term bonds cannot be sold as quickly at face value relative to short-term bonds, meaning that long-term bondholders may be forced to sell their bond holdings at a discount if they need to raise cash quickly. Duration risk is the susceptibility of the market value of longer-term bonds to changes in the term structure, which can affect the price at which investors can resell their longer-term bonds on the market.
Framework of the Term Structure: Market Segmentation
A second framework of the term structure is market segmentation. This hypothesis posits that the markets for bonds of different maturities are entirely separate (i.e. bonds of different maturities are not substitutes for each other), with different investors active in each market according to their need. For example, money market funds are active in the short-term bond market to limit duration risk while life insurance companies buy and sell long-term bonds to ensure a steady, long-term stream of income that can be used to pay out long-lasting insurance claims.
The interest rate implication of assuming that bonds are not substitutable across different maturities is that the term structure of interest rates will be determined solely by supply and demand dynamics in the market for each different maturity. In other words, short-term interest rates have no impact on long-term rates, as the interest rate on 10-year bonds rises if, and only if, demand declines or supply increases for these bonds. Similarly, this rate will decline only if demand increases or supply declines.
Framework of the Term Structure: Preferred Habitat Theory
A final view of the term structure, which combines much of the unpure expectations hypothesis with some of market segmentation, is the preferred habit theory (PHT). This theory begins with the market segmentation assumption that investors have preferred maturities. It continues, however, by agreeing with the unpure expectations hypothesis that investors are willing to substitute their investment into other, less preferred maturities if they are compensated for doing so. PHT also implies that some investors may be willing to pay a premium (accept a lower interest rate) to invest in their preferred security rather than making this substitution. The theory further agrees with the expectations hypotheses that expectations of future short-term interest rates do play a role in determining current long-term interest rates
The implications of PHT regarding the term structure are threefold. First, as just mentioned, long-term interest rates are in part determined by expectations of future short-term interest rates. Second, long-term interest rates do include a risk premium that, unlike in the expectations hypothesis, can be either positive (to compensate investors for substituting across maturities) or negative (to reflect investors' willingness to accept lower returns to remain in their preferred maturity). And third, long-term interest rates for a given maturity can be impacted by supply-demand dynamics in that maturity market, as investors cannot wholly internalize changes in supply or demand by substituting into other maturities.
Policy Implications of the Term Structure
At this point, readers would not be remiss in thinking that the bulk of this insight has consisted of financial and economic theory. These frameworks of the term structure, however, are critical for policymakers who must contend with the effects of interest rates on economic growth and specific assets such as mortgages or cars. To elucidate the implication of these frameworks, it is useful to consider a historical example: the 2008 global financial crisis.
During the crisis, as the economy shook in the wake of mortgage defaults, bank failures, and the potential collapse of insurance giant AIG, policymakers at the Federal Reserve looked to stimulate economic activity. To do so, they turned to interest rates. Specifically, they turned to the short-term fed funds rate, which they soon lowered to almost zero to reduce the cost of borrowing.
Policymakers then faced a conundrum: Although the economy needed more stimulus, they could no longer reduce short-term interest rates. (While interest-rate policymakers in the United States have decided against lowering policy interest rates below zero, central bankers in many other countries have reduced rates below zero. For more on this question, see here.) One way to generate this additional stimulus was to somehow further reduce long-term interest rates, which had not fallen to almost zero, to make borrowing and investment even cheaper for consumers and businesses. In other words, policymakers needed to influence the term structure of interest rates.
To do so, policymakers turned to, among other things, two unconventional tools known as forward guidance and quantitative easing. Forward guidance is when policymakers at the Fed give hints as to the future path of short-term interest rates. According to both the expectations hypothesis and PHT, these hints should influence investors' expectations of future short-term interest rates and, thus, influence current long-term rates. Although forward guidance had been used previously, forward guidance during the crisis was much more explicit in its language, detailing that the Fed was prepared to keep interest rates low for a significant period. For instance, in December 2008, the Fed stated that the economic outlook was ""likely to warrant exceptionally low levels of the federal funds rate for some time."
In addition to forward guidance, the Fed also turned to quantitative easing (QE), or large-scale purchases of assets from financial markets, to reduce long-term yields. This quantitative easing took two forms. The first was outright purchases of assets on financial markets, while the second was using the proceeds from sales of short-term assets to purchase an equivalent number of long-term assets.
A central idea underpinning both forms of QE is that, as hypothesized by the PHT, assets with different maturities are not perfect substitutes for investors. Consequently, by buying and selling assets at different maturities, the Fed would be able to change the supply and demand dynamics of different maturities in ways that influence interest rates. With respect to the first form of QE, the Fed's actions would have reduced long-term interest rates by reducing the public supply of long-term assets by more than the demand for these assets could adjust to bring interest rates back to equilibrium. The second form of QE, while more complicated and interesting because it involved both sales and purchases of assets, would have brought down yields through a similar mechanism.
A survey of research about crisis-era forward guidance and QE finds that both unconventional tools did in fact reduce long-term yields. This highlights not only the extent to which expectations of future interest rates and supply and demand dynamics can influence long-term yields but also illustrates why understanding the term structure of interest rates is so important for policymakers. Without this understanding of the term structure, policymakers would have been less equipped to respond.
Conclusion
As the price of borrowing, interest rates are a key input into the United States' credit-driven economy. Yet the interest rate policymakers control, the short-term fed funds rate, does not unilaterally set the borrowing price on financial markets in the United States. There are, however, other tools available to influence interest rates across the term structure to accomplish economic goals. As policymakers' understanding of the term structure continues to evolve and improve, this influence could perhaps become stronger, enabling more powerful and effective economic policymaking.
* * *
Original text here: https://www.americanactionforum.org/insight/the-long-and-the-short-of-it-the-term-structure-of-interest-rates/
[Category: Think Tank]
* * *
The Long and the Short of It: The Term Structure of Interest Rates
Executive Summary
* While the Federal Reserve (Fed) is often described as setting interest rates - or the price of borrowing money - it in fact only controls a single short-term interest rate and does not directly control the longer-term rates that matter for economic activity, such as mortgage, credit card, and auto loan rates.
* Nonetheless, the Fed is able to influence these longer-term interest ... Show Full Article WASHINGTON, Sept. 2 -- The American Action Forum issued the following insight on Sept. 1, 2026, by policy fellow Oren Swagel: * * * The Long and the Short of It: The Term Structure of Interest Rates Executive Summary * While the Federal Reserve (Fed) is often described as setting interest rates - or the price of borrowing money - it in fact only controls a single short-term interest rate and does not directly control the longer-term rates that matter for economic activity, such as mortgage, credit card, and auto loan rates. * Nonetheless, the Fed is able to influence these longer-term interestrates by changing its short-term rate; the relationship between short- and long-term interest rates that explains this influence is known as the term structure of interest rates.
* The important question for the economy is therefore to what extent short-term interest rates can influence longer-term rates; this insight reviews the main schools of thought on the term structure of interest rates that attempt to answer this question.
-
Introduction
Interest rates function as the price consumers, businesses, and the government pay to borrow money. While the Federal Reserve (Fed) is often described as controlling interest rates, it in fact controls only a single short-term interest rate, the federal funds rate, which dictates the cost banks face when borrowing money from other banks overnight. By contrast, the Fed does not control the longer-term interest rates that matter for real economic activity, such as those for mortgages, car loans, and credit cards.
Even though the Fed cannot directly control these longer-term rates, it can still influence them by changing its short-term rate. When the Fed raises the federal funds rate, for instance, longer-term rates tend to rise in response. The relationship between short- and long-term interest rates that explain this influence is called the term structure of interest rates.
The important economic question is therefore to what extent movements in short-term interest rates can induce changes in long-term rates. There are multiple schools of thoughts that aim to explain the term structure of interest rates, including the expectations hypothesis, market segmentation, and the preferred habitat theory. First, however, it reviews interest rates, the role of the Fed in setting them, and how they affect consumers. It concludes by reviewing a historical case study from the 2008 global financial crisis (GFC).
Interest Rates, Consumers, and the Federal Reserve
Interest rates may seem complicated; articles and stories discussing them often use financial jargon. For instance, rates are often quoted in basis points, which is just another way of saying 1/100 of a percentage point. (25 basis points, a typical interest rate change from the Fed, is, therefore, .25 percentage points).
Interest rates, however, are just another price in the market, albeit in the money market. Indeed, from the borrower's (buyer's) perspective, they are the cost of borrowing money. From the lender's (seller's) point of view, they are the price charged for lending money. So, for example, if a lender offers to loan $1 to a borrower on the condition that the borrower pays back $1.03 in a year's time, the interest rate (or price) on that loan is 3 percent.
Media reports regarding the Federal Reserve often convey the impression that it wields total control over interest rates; if the Fed raises rates, borrowing money becomes more expensive, and vice-versa if it lowers interest rates. In many ways, this view of the Fed's power is accurate: When the Fed raises rates, borrowing money usually does become more expensive. Unfortunately, this view misses some important details. For starters, there is no single interest rate in the economy. There are mortgage related interest rates (more on these soon), car loan interest rates, and even buy-now-pay-later interest rates that dictate the cost of buying a Chipotle burrito using borrowed money.
One of these many interest rates, the federal funds rate, is the rate that the Fed controls. While the details surrounding the rate changed significantly in the wake of the global financial crisis, it is, for the purposes of this paper, useful to consider the federal funds rate as an extremely short-term - "overnight - interest rate.
Almost all other interest rates correspond to much longer periods than just overnight. Mortgages, for instance, are often made with 30-year timelines, making the associated interest rate a 30-year interest rate. Yet given the role of the Federal Reserve in the country's financial system, the federal funds rate still plays a role in influencing other interest rates in the economy. This influence, however, is not uniform across all interest rates, with longer-term rates often being less influenced by the federal funds rate.
The following two figures can help to visualize the disparate influence of the federal funds rate on long-term interest rates.
Figure 1 shows the federal funds rate and the bank prime loan rate, which is the average interest rate charged by the country's largest banks to their top customers for short-term business loans. Figure 1 highlights two important realities. First, these two rates move together almost in lockstep (indeed, the correlation between the two in Figure 1's sample period is .99993). And second, the level of the bank rate is always higher than the federal funds rate. This gap highlights how the federal funds rate serves only as a baseline for other interest rates, guiding, but not controlling, their values.
Figure 2 plots the federal funds rate, 30-year mortgage rates, and 15-year mortgage rates. Like with the bank rate in Figure 1, there is some co-movement between these three rates. Unlike in Figure 1, however, the three rates clearly do not move in lockstep. Sometimes, they even diverge. For instance, at the end of 2013, mortgage rates spiked even as the federal funds rate was kept near 0. As economists at the Dallas Fed note: "the difference between the 30-year primary mortgage rate and the fed funds target has been as tight as [.7 percentage points] and as wide as" 6 percentage points.
The reduced influence of the federal funds rate on mortgage rates reflects the time and risk difference between borrowing priced by the overnight rate and borrowing priced by decades-long mortgage rates. Economists at the Atlanta Fed explain that, "because the average life of a mortgage is around seven to 10 years," mortgage interest rates "are more strongly linked to longer-term rates such as the [interest rates on] 10- or 20-year" U.S. Treasury debt. While these Treasury debt rates are, in turn, also influenced by the federal funds rate, mortgage markets also factor in "the market's expectation for economic growth, the federal government's fiscal policies on spending and taxation, inflation expectations, lender capacity as homeowners refinance their mortgages, borrowers' credit risk, and so forth." Beyond mortgages, many of these same factors will influence interest rates for all types of lending, such as car loans, municipal debt, and, yes, Chipotle burrito loans.
The Term Structure of Interest Rates and the Yield Curve
If the Fed is limited to changing one short-term interest rate, an important issue for policymakers to understand is the relationship between this short-term rate and the longer-term interest rates (such as mortgages, cars, capital investment by firms) that price the credit that drives economic growth. Economists have come up with multiple frameworks about how short-term interest rates can affect long-term rates.
In developing and understanding these frameworks, economists first look to compare short-term and long-term interest rates for loans that are the same in every way (amount, tax applications, etc.) except for how long the borrower has to repay the loan. This mapping of interest rates to the length of their loan is known as the "term structure."
To visualize the term structure, economists and financial market participants use a yield curve, which is a plot of interest rates for similar loans with different maturities. In their analysis, these individuals typically use the yield curve for U.S. Treasury debt, which, as the most important financial asset, often sets a benchmark for interest rates for other financial assets. Because of this outsized importance, the U.S. Treasury yield curve is typically known as "the yield curve." The plot below shows the yield curve as of August 28, 2026.
Frameworks of the Term Structure: The Expectations Hypothesis
The first view of the term structure is the expectations hypothesis. There are two forms of this hypothesis: pure and unpure. Both forms begin with the same assumptions: (1) every potential loan for a specific type of borrowing is exactly the same except for the length of the loan; (2) the goal of an investor is to maximize profits; and (3) investors, without knowing what short-term interest rates will be in the future, develop expectations of these future rates.
The pure expectations hypothesis further assumes that investors behave as if their expectations are 100 percent going to come true. In other words, investors believe that interest rates in a year, or two, or three, will be exactly what they expect them to be today. The implication of this rock-solid expectation is that the interest rate on a long-term bond "of a given maturity is an average of the current short-term rate and all future expected short rates over the term to maturity." The reason for this implication is that if the interest rate of a bond with maturity of 5 years differed from the average short-term interest rate over the next 5 years, then rock-solidly confident investors could buy the bond with a higher return while selling the bonds with lower interest rates, making off with a huge profit. In buying and selling bonds in this way, however, investors would bid up the price of the bond with higher returns and bid down the price of the bond with lower returns until there is no profit to be made. And since interest rates move inversely with a bond's price, doing this would equalize long-term returns with the average of short-term returns.
The following simple example of the pure expectations hypothesis should further clarify how this framework works. Consider an investor who wants to invest money in bonds for two years and has the choice of investing in 2 1-year bonds or 1 2-year bond. The 1-year interest rate currently stands at 3 percent. The investor expects that next year's 1-year interest rate will rise to 4 percent. If the investor invests in these 2 1-year bonds, he or she can expect to make a total return of 7 percent over two years. (Compounded interest means the return will differ slightly from 7 percent, but this can be abstracted away for simplicity.) On an annual basis, then, the investor will make a 3.5 percent return over 2 years. Consequently, according to the pure expectations hypothesis, the 2-year bond should have an annual interest rate of 3.5 percent to give the investor the same 7 percent return over 2 years.
The unpure expectations hypothesis assumes that investors do not have complete confidence in their interest rate expectations but instead believe there to be some uncertainty around whether their predictions of future short-term interest rates will come true. This version of the hypothesis also assumes that investors are risk averse, meaning that they must be compensated with an extra return for taking on the risk that changes in future interest rates may not be what they currently expect and, therefore, the return they receive may change. The implication of these two assumptions for the term structure is that future interest rates are the sum of the weighted average of current and future short-term interest rates expectations (the pure expectations hypothesis) and a positive risk premium that compensates investors for the risk that their long-term bonds lose value.
To further clarify the implications of the unpure expectations hypothesis, it is worthwhile to return to the simple example above. Previously, the investor expected that next year's 1-year interest rate would be 4 percent and invested money as if that was going to happen no matter what. Now, while the investor still expects that next year's 1-year interest rate will be 4 percent, he or she neither believes nor behaves as if a 4 percent interest rate is an absolute certainty. The investor realizes, for example, that interest rates could in fact rise to 4.1 percent, making the 2-year average interest rate 3.55 percent rather than 3.5 percent. Given this uncertainty, the investor is no longer willing to invest in a 2-year bond at a 3.5 percent interest rate - if next year's 1-year rate rises to 4.1 percent, then a 2-year bond at a 3.5 percent interest rate will be worth less. Instead, even though the investor still expects that next year's interest rate will be 4 percent, he or she is only willing to invest in a 2-year bond if they receive some extra return to compensate for the risk that next year's interest rate is not 4 percent. Consequently, the interest rate on a 2-year bond might be 3.53 percent, which can be decomposed into the 3.5 percent implied by the pure expectations hypothesis and the .03 percent extra return required by the investor to assume the risk that future interest rates might turn out differently from expectations.
It is important to note that there are multiple possible risks that the risk premium could be compensating for, including credit, liquidity, and duration risk. Credit risk is the risk that the borrower does not repay the loan. Liquidity risk represents the fact that longer-term bonds cannot be sold as quickly at face value relative to short-term bonds, meaning that long-term bondholders may be forced to sell their bond holdings at a discount if they need to raise cash quickly. Duration risk is the susceptibility of the market value of longer-term bonds to changes in the term structure, which can affect the price at which investors can resell their longer-term bonds on the market.
Framework of the Term Structure: Market Segmentation
A second framework of the term structure is market segmentation. This hypothesis posits that the markets for bonds of different maturities are entirely separate (i.e. bonds of different maturities are not substitutes for each other), with different investors active in each market according to their need. For example, money market funds are active in the short-term bond market to limit duration risk while life insurance companies buy and sell long-term bonds to ensure a steady, long-term stream of income that can be used to pay out long-lasting insurance claims.
The interest rate implication of assuming that bonds are not substitutable across different maturities is that the term structure of interest rates will be determined solely by supply and demand dynamics in the market for each different maturity. In other words, short-term interest rates have no impact on long-term rates, as the interest rate on 10-year bonds rises if, and only if, demand declines or supply increases for these bonds. Similarly, this rate will decline only if demand increases or supply declines.
Framework of the Term Structure: Preferred Habitat Theory
A final view of the term structure, which combines much of the unpure expectations hypothesis with some of market segmentation, is the preferred habit theory (PHT). This theory begins with the market segmentation assumption that investors have preferred maturities. It continues, however, by agreeing with the unpure expectations hypothesis that investors are willing to substitute their investment into other, less preferred maturities if they are compensated for doing so. PHT also implies that some investors may be willing to pay a premium (accept a lower interest rate) to invest in their preferred security rather than making this substitution. The theory further agrees with the expectations hypotheses that expectations of future short-term interest rates do play a role in determining current long-term interest rates
The implications of PHT regarding the term structure are threefold. First, as just mentioned, long-term interest rates are in part determined by expectations of future short-term interest rates. Second, long-term interest rates do include a risk premium that, unlike in the expectations hypothesis, can be either positive (to compensate investors for substituting across maturities) or negative (to reflect investors' willingness to accept lower returns to remain in their preferred maturity). And third, long-term interest rates for a given maturity can be impacted by supply-demand dynamics in that maturity market, as investors cannot wholly internalize changes in supply or demand by substituting into other maturities.
Policy Implications of the Term Structure
At this point, readers would not be remiss in thinking that the bulk of this insight has consisted of financial and economic theory. These frameworks of the term structure, however, are critical for policymakers who must contend with the effects of interest rates on economic growth and specific assets such as mortgages or cars. To elucidate the implication of these frameworks, it is useful to consider a historical example: the 2008 global financial crisis.
During the crisis, as the economy shook in the wake of mortgage defaults, bank failures, and the potential collapse of insurance giant AIG, policymakers at the Federal Reserve looked to stimulate economic activity. To do so, they turned to interest rates. Specifically, they turned to the short-term fed funds rate, which they soon lowered to almost zero to reduce the cost of borrowing.
Policymakers then faced a conundrum: Although the economy needed more stimulus, they could no longer reduce short-term interest rates. (While interest-rate policymakers in the United States have decided against lowering policy interest rates below zero, central bankers in many other countries have reduced rates below zero. For more on this question, see here.) One way to generate this additional stimulus was to somehow further reduce long-term interest rates, which had not fallen to almost zero, to make borrowing and investment even cheaper for consumers and businesses. In other words, policymakers needed to influence the term structure of interest rates.
To do so, policymakers turned to, among other things, two unconventional tools known as forward guidance and quantitative easing. Forward guidance is when policymakers at the Fed give hints as to the future path of short-term interest rates. According to both the expectations hypothesis and PHT, these hints should influence investors' expectations of future short-term interest rates and, thus, influence current long-term rates. Although forward guidance had been used previously, forward guidance during the crisis was much more explicit in its language, detailing that the Fed was prepared to keep interest rates low for a significant period. For instance, in December 2008, the Fed stated that the economic outlook was ""likely to warrant exceptionally low levels of the federal funds rate for some time."
In addition to forward guidance, the Fed also turned to quantitative easing (QE), or large-scale purchases of assets from financial markets, to reduce long-term yields. This quantitative easing took two forms. The first was outright purchases of assets on financial markets, while the second was using the proceeds from sales of short-term assets to purchase an equivalent number of long-term assets.
A central idea underpinning both forms of QE is that, as hypothesized by the PHT, assets with different maturities are not perfect substitutes for investors. Consequently, by buying and selling assets at different maturities, the Fed would be able to change the supply and demand dynamics of different maturities in ways that influence interest rates. With respect to the first form of QE, the Fed's actions would have reduced long-term interest rates by reducing the public supply of long-term assets by more than the demand for these assets could adjust to bring interest rates back to equilibrium. The second form of QE, while more complicated and interesting because it involved both sales and purchases of assets, would have brought down yields through a similar mechanism.
A survey of research about crisis-era forward guidance and QE finds that both unconventional tools did in fact reduce long-term yields. This highlights not only the extent to which expectations of future interest rates and supply and demand dynamics can influence long-term yields but also illustrates why understanding the term structure of interest rates is so important for policymakers. Without this understanding of the term structure, policymakers would have been less equipped to respond.
Conclusion
As the price of borrowing, interest rates are a key input into the United States' credit-driven economy. Yet the interest rate policymakers control, the short-term fed funds rate, does not unilaterally set the borrowing price on financial markets in the United States. There are, however, other tools available to influence interest rates across the term structure to accomplish economic goals. As policymakers' understanding of the term structure continues to evolve and improve, this influence could perhaps become stronger, enabling more powerful and effective economic policymaking.
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Original text here: https://www.americanactionforum.org/insight/the-long-and-the-short-of-it-the-term-structure-of-interest-rates/
[Category: Think Tank]
American Action Forum Issues Insight: Bank Supervision - Unsafe and Unsound Final Rule
WASHINGTON, Sept. 2 -- The American Action Forum issued the following insight on Sept. 1, 2026, by Financial Services Policy Director Thomas Kingsley:
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Bank Supervision: Unsafe and Unsound Final Rule
Executive Summary
* The Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency have jointly finalized a rule seeking to restore clarity and discipline to federal bank supervision by codifying the definition of "unsafe or unsound practice," constraining the use of informal supervisory communications, and encouraging more proportionate enforcement actions.
* ... Show Full Article WASHINGTON, Sept. 2 -- The American Action Forum issued the following insight on Sept. 1, 2026, by Financial Services Policy Director Thomas Kingsley: * * * Bank Supervision: Unsafe and Unsound Final Rule Executive Summary * The Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency have jointly finalized a rule seeking to restore clarity and discipline to federal bank supervision by codifying the definition of "unsafe or unsound practice," constraining the use of informal supervisory communications, and encouraging more proportionate enforcement actions. *By formally tethering supervisory tools to material risk, the rule seeks to reduce examiner overreach, improve consistency across institutions, and lower the compliance burden tied to nonbinding but influential findings such as Matters Requiring Attention.
* The rule's success will hinge on implementation; absent internal guardrails and cultural change within supervisory ranks, the intended shift toward risk-focused oversight may remain largely theoretical.
-
Introduction
On October 7, 2025, the Federal Deposit Insurance Corporation (FDIC) and the Office of the Comptroller of the Currency (OCC) jointly proposed a rule that seeks to narrow the scope of federal bank supervision and recalibrate the use of enforcement tools to better align with risk-based threats to institutional safety and soundness. On August 25, 2026, the agencies released the final version of the rule. The new rule aims at a longstanding structural tension within the supervisory regime: the overextension of examiner discretion, especially in areas that touch indirectly (or not at all) on the core health of a banking institution.
If finalized, the rule introduces three substantive reforms. First, it formally defines the term "unsafe or unsound practice," a statutory concept that underpins most supervisory and enforcement actions but has historically lacked clear boundaries. Second, it imposes new constraints on nonbinding supervisory communications - such as Matters Requiring Attention (MRAs) - that, while informal, often operate as de facto mandates. Third, it encourages a more calibrated approach to enforcement, allowing agencies to scale their responses more proportionally to the underlying issue. Together, these changes reflect a measured effort to restore clarity and predictability to the supervisory process.
Refining the Definition of "Unsafe or Unsound Practice"
Central to the effort is a long-overdue attempt to codify the meaning of "unsafe or unsound practice," the legal basis for a wide range of supervisory findings and enforcement actions. Despite its foundational role in the Federal Deposit Insurance Act, the term has never been formally defined in regulation. In practice, this vagueness has allowed supervisors to invoke the standard in connection with a wide array of bank behaviors, including technical violations, process shortcomings, or even subjective assessments of management quality.
The definition provided by the final rule will tether the term more firmly to practices that both deviate from sound banking operations and are likely to cause material harm to the institution. Specifically, an "unsafe or unsound practice" is defined as one that is "reasonably expected to cause an abnormal risk of loss or damage to the institution, its depositors, or the Deposit Insurance Fund." This formulation narrows the aperture, signaling that not every procedural deficiency or compliance misstep would automatically fall within supervisory reach. It also creates a clearer threshold for when informal criticism becomes formal enforcement - an important distinction for institutions seeking to understand regulatory expectations and manage compliance costs.
Constraining the Use of Supervisory Communications
The second major reform targets a familiar but understudied aspect of modern bank regulation: the proliferation of nonbinding supervisory communications. Instruments such as MRAs and Matters Requiring Immediate Attention (MRIAs) are not enforceable orders, but they carry significant weight in shaping institutional behavior. Over time, they have become a vehicle for regulatory guidance and examiner preference, often with limited recourse or transparency.
Under the rule, the agencies will limit these tools to circumstances in which a bank's deficiencies present a clear risk to safety and soundness or involve repeat violations of law. MRAs would be issued only when supported by a documented factual record, and agencies would be expected to distinguish clearly between binding directives and supervisory recommendations. The goal is seemingly not to eliminate informal communications but to ensure they are used sparingly and purposefully - reducing the incidence of supervisory "noise" and encouraging examiners to focus attention on substantive risk.
Of note, the rule will also promote consistency in how such communications are applied across institutions. Historically, similarly situated banks have faced very different expectations depending on examiner approach and agency region. A more formal framework could reduce this variability and support a level playing field, particularly for smaller institutions that lack the resources to challenge supervisory feedback.
Aligning Enforcement With Actual Risk
The last component of the final rule encourages a more proportionate approach to enforcement. Under current practice, there is often little distinction between enforcement actions taken for material deficiencies and those issued for relatively minor infractions. This has contributed to a compliance environment in which banks feel compelled to treat all findings - regardless of severity - with equal urgency, diverting attention and resources from areas of genuine risk.
The new rule would allow for a more graduated supervisory response, with agencies expected to match enforcement tools to the seriousness of the issue. In principle, this change could reduce the number of formal actions issued for low-level issues and restore the distinction between supervisory concern and legal violation. It also signals a shift in regulatory posture away from expansive intervention and toward a more disciplined, risk-sensitive model.
The final version of the rule is slightly narrower in scope from the October 2025 proposal. While the original proposal envisaged applying the standard to both banks and certain individuals (directors, officers, other covered individuals), the final rule expressly limits itself to entities supervised by the OCC or FDIC. The final rule also expressly calls for an objective factual basis for determinations made that examiners must share with the bank in question.
Caveats and Concerns
The promise of the proposal is real, but it carries significant implementation risks:
* Ambiguity in Definitions: The proposed language still leaves considerable room for interpretation, arguably fatally undermining the single purpose of the proposal. Without further guidance, banks may continue to operate under uncertainty.
* Supervisory Culture May Lag Rulemaking: Codified definitions are only as strong as examiner adherence. Without robust training, oversight, and internal accountability mechanisms, supervisory behavior may remain unchanged.
* Transitional Complexity: Institutions will need to recalibrate policies and examiner relationships. A phased and coordinated rollout will be essential to avoid friction and confusion.
* Potential for Uneven Application: Large banks may benefit more quickly from the reform, while community banks could struggle with inconsistency in examiner expectations.
* Need for Transparency and Retrospective Review: The rule lacks a built-in mechanism for measuring effectiveness post-implementation. Regulators should commit to periodic reporting on supervisory communication volumes and enforcement trends.
* Uninvolvement of the Federal Reserve: This proposal would have had even greater legitimacy if the FDIC and OCC had been joined by the third key bank regulator, the Federal Reserve. Vice Chair for Supervision Michelle Bowman is working on a parallel assessment of the supervisory regime, but it is unclear why the Fed could not have simply joined this effort.
Conclusion
The FDIC and OCC's final rule reflects a deliberate and largely welcome attempt to clarify the scope of federal bank supervision. By anchoring enforcement to clearly defined standards, narrowing the use of informal supervisory tools, and encouraging proportional responses to risk, the agencies aim to improve both the transparency and legitimacy of the supervisory process.
Yet the ultimate effect of these reforms will depend less on rulemaking than on implementation. Regulatory culture is slow to change, and examiners will require strong internal guidance, training, and oversight to operationalize the proposed framework effectively. Without such support, there is a real risk that longstanding supervisory habits will continue unchecked, regardless of what the rule says on paper.
Still, if the agencies follow through with discipline and transparency, this proposal could mark a meaningful inflection point in the evolution of bank supervision. Institutions would gain greater certainty, regulators could focus more intently on genuine risk, and the supervisory process as a whole might become more effective, equitable, and appropriately restrained.
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Original text here: https://www.americanactionforum.org/insight/bank-supervision-unsafe-and-unsound-final-rule/
[Category: Think Tank]
* * *
Bank Supervision: Unsafe and Unsound Final Rule
Executive Summary
* The Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency have jointly finalized a rule seeking to restore clarity and discipline to federal bank supervision by codifying the definition of "unsafe or unsound practice," constraining the use of informal supervisory communications, and encouraging more proportionate enforcement actions.
* ... Show Full Article WASHINGTON, Sept. 2 -- The American Action Forum issued the following insight on Sept. 1, 2026, by Financial Services Policy Director Thomas Kingsley: * * * Bank Supervision: Unsafe and Unsound Final Rule Executive Summary * The Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency have jointly finalized a rule seeking to restore clarity and discipline to federal bank supervision by codifying the definition of "unsafe or unsound practice," constraining the use of informal supervisory communications, and encouraging more proportionate enforcement actions. *By formally tethering supervisory tools to material risk, the rule seeks to reduce examiner overreach, improve consistency across institutions, and lower the compliance burden tied to nonbinding but influential findings such as Matters Requiring Attention.
* The rule's success will hinge on implementation; absent internal guardrails and cultural change within supervisory ranks, the intended shift toward risk-focused oversight may remain largely theoretical.
-
Introduction
On October 7, 2025, the Federal Deposit Insurance Corporation (FDIC) and the Office of the Comptroller of the Currency (OCC) jointly proposed a rule that seeks to narrow the scope of federal bank supervision and recalibrate the use of enforcement tools to better align with risk-based threats to institutional safety and soundness. On August 25, 2026, the agencies released the final version of the rule. The new rule aims at a longstanding structural tension within the supervisory regime: the overextension of examiner discretion, especially in areas that touch indirectly (or not at all) on the core health of a banking institution.
If finalized, the rule introduces three substantive reforms. First, it formally defines the term "unsafe or unsound practice," a statutory concept that underpins most supervisory and enforcement actions but has historically lacked clear boundaries. Second, it imposes new constraints on nonbinding supervisory communications - such as Matters Requiring Attention (MRAs) - that, while informal, often operate as de facto mandates. Third, it encourages a more calibrated approach to enforcement, allowing agencies to scale their responses more proportionally to the underlying issue. Together, these changes reflect a measured effort to restore clarity and predictability to the supervisory process.
Refining the Definition of "Unsafe or Unsound Practice"
Central to the effort is a long-overdue attempt to codify the meaning of "unsafe or unsound practice," the legal basis for a wide range of supervisory findings and enforcement actions. Despite its foundational role in the Federal Deposit Insurance Act, the term has never been formally defined in regulation. In practice, this vagueness has allowed supervisors to invoke the standard in connection with a wide array of bank behaviors, including technical violations, process shortcomings, or even subjective assessments of management quality.
The definition provided by the final rule will tether the term more firmly to practices that both deviate from sound banking operations and are likely to cause material harm to the institution. Specifically, an "unsafe or unsound practice" is defined as one that is "reasonably expected to cause an abnormal risk of loss or damage to the institution, its depositors, or the Deposit Insurance Fund." This formulation narrows the aperture, signaling that not every procedural deficiency or compliance misstep would automatically fall within supervisory reach. It also creates a clearer threshold for when informal criticism becomes formal enforcement - an important distinction for institutions seeking to understand regulatory expectations and manage compliance costs.
Constraining the Use of Supervisory Communications
The second major reform targets a familiar but understudied aspect of modern bank regulation: the proliferation of nonbinding supervisory communications. Instruments such as MRAs and Matters Requiring Immediate Attention (MRIAs) are not enforceable orders, but they carry significant weight in shaping institutional behavior. Over time, they have become a vehicle for regulatory guidance and examiner preference, often with limited recourse or transparency.
Under the rule, the agencies will limit these tools to circumstances in which a bank's deficiencies present a clear risk to safety and soundness or involve repeat violations of law. MRAs would be issued only when supported by a documented factual record, and agencies would be expected to distinguish clearly between binding directives and supervisory recommendations. The goal is seemingly not to eliminate informal communications but to ensure they are used sparingly and purposefully - reducing the incidence of supervisory "noise" and encouraging examiners to focus attention on substantive risk.
Of note, the rule will also promote consistency in how such communications are applied across institutions. Historically, similarly situated banks have faced very different expectations depending on examiner approach and agency region. A more formal framework could reduce this variability and support a level playing field, particularly for smaller institutions that lack the resources to challenge supervisory feedback.
Aligning Enforcement With Actual Risk
The last component of the final rule encourages a more proportionate approach to enforcement. Under current practice, there is often little distinction between enforcement actions taken for material deficiencies and those issued for relatively minor infractions. This has contributed to a compliance environment in which banks feel compelled to treat all findings - regardless of severity - with equal urgency, diverting attention and resources from areas of genuine risk.
The new rule would allow for a more graduated supervisory response, with agencies expected to match enforcement tools to the seriousness of the issue. In principle, this change could reduce the number of formal actions issued for low-level issues and restore the distinction between supervisory concern and legal violation. It also signals a shift in regulatory posture away from expansive intervention and toward a more disciplined, risk-sensitive model.
The final version of the rule is slightly narrower in scope from the October 2025 proposal. While the original proposal envisaged applying the standard to both banks and certain individuals (directors, officers, other covered individuals), the final rule expressly limits itself to entities supervised by the OCC or FDIC. The final rule also expressly calls for an objective factual basis for determinations made that examiners must share with the bank in question.
Caveats and Concerns
The promise of the proposal is real, but it carries significant implementation risks:
* Ambiguity in Definitions: The proposed language still leaves considerable room for interpretation, arguably fatally undermining the single purpose of the proposal. Without further guidance, banks may continue to operate under uncertainty.
* Supervisory Culture May Lag Rulemaking: Codified definitions are only as strong as examiner adherence. Without robust training, oversight, and internal accountability mechanisms, supervisory behavior may remain unchanged.
* Transitional Complexity: Institutions will need to recalibrate policies and examiner relationships. A phased and coordinated rollout will be essential to avoid friction and confusion.
* Potential for Uneven Application: Large banks may benefit more quickly from the reform, while community banks could struggle with inconsistency in examiner expectations.
* Need for Transparency and Retrospective Review: The rule lacks a built-in mechanism for measuring effectiveness post-implementation. Regulators should commit to periodic reporting on supervisory communication volumes and enforcement trends.
* Uninvolvement of the Federal Reserve: This proposal would have had even greater legitimacy if the FDIC and OCC had been joined by the third key bank regulator, the Federal Reserve. Vice Chair for Supervision Michelle Bowman is working on a parallel assessment of the supervisory regime, but it is unclear why the Fed could not have simply joined this effort.
Conclusion
The FDIC and OCC's final rule reflects a deliberate and largely welcome attempt to clarify the scope of federal bank supervision. By anchoring enforcement to clearly defined standards, narrowing the use of informal supervisory tools, and encouraging proportional responses to risk, the agencies aim to improve both the transparency and legitimacy of the supervisory process.
Yet the ultimate effect of these reforms will depend less on rulemaking than on implementation. Regulatory culture is slow to change, and examiners will require strong internal guidance, training, and oversight to operationalize the proposed framework effectively. Without such support, there is a real risk that longstanding supervisory habits will continue unchecked, regardless of what the rule says on paper.
Still, if the agencies follow through with discipline and transparency, this proposal could mark a meaningful inflection point in the evolution of bank supervision. Institutions would gain greater certainty, regulators could focus more intently on genuine risk, and the supervisory process as a whole might become more effective, equitable, and appropriately restrained.
* * *
Original text here: https://www.americanactionforum.org/insight/bank-supervision-unsafe-and-unsound-final-rule/
[Category: Think Tank]