All Blog Posts from Econwatch

When the interest rate decision is announced today, the Federal Open Market Committee will most likely leave its current monetary policy unchanged and say that "economic conditions are likely to warrant exceptionally low levels of the federal funds rate for an extended period."


In other words, just because Chairman Bernanke said that the recession is "technically over," that doesn't mean that consumers are feeling too swell or that Fed policy will shift. Fed governors have told us as much in their public statements and appearances. Just because we have backed away from the edge of disaster doesn't mean that a sustained recovery is baked in the cake.

Here's what I think is on Bernanke's mind right now:

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When the recent US Census Bureau report "Income, Poverty, and Health Insurance Coverage in the United States: 2008" was released, it was depressing. Real median household income fell 3.6% percent between 2007 and 2008, from $52,163 to $50,303. It's not just last year that's the problem: median income has stagnated over the past decade. In 1998, median income was $51,295, adjusted for inflation. And if you're a worker of a certain age, say my age, you may have fared even worse in this recession. Workers aged 45-54 saw household income plunge $7,700 to $64,439 from 2000-2008.

With this said, you may be surprised about what I'm about to say: if you are a valuable employee, now may be a good time to start talking about compensation. Blasphemy! Who would dare to broach the subject of a raise during "the worst recession since..."? Um, that would be me with Harry Smith this morning on The Early Show.

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Newsweek reports that Federal Reserve Board Chairman Ben Bernanke and his wife, Anna, were two of hundreds of victims in an elaborate, countrywide crime ring run by a scam artist known as "Big Head."

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By reappointing Federal Reserve Chairman Ben Bernanke to another term, President Obama has chosen to dance with the devil he knows–that’s a good idea. The economy is just starting to show signs of stabilization and changing course would be unsettling.

I was not a fan of Bernanke when he assumed his position. I thought of him as a Greenspan acolyte who far too often turned to easy monetary policy to solve problems. He didn’t earn the name “Helicopter Ben” for nothing! In fact, I was critical of Bernanke until we were well into the eye of the storm. I thought that he and other officials waited too long to adjust monetary policy amid the gathering storm.

But after the barn door blew wide open, I warmed up to Big Ben. He went beyond the ordinary tools at the Fed’s disposal and brought creativity to the crisis. I also like that he makes himself easily understood, a stark contrast to his predecessor.

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Federal Reserve Chairman Ben Bernanke is strongly opposing a proposal in Congress, which enjoys the support of over half of the U.S. House of Representatives, to audit the Fed.

During an appearance on PBS's NewsHour, which will be aired this week on local PBS stations, Bernanke said the proposed legislation would interfere with the central bank's independence. "I don't think the American people want Congress running monetary policy," he said. "And I think that's very very critical for people to understand." (See transcript below.)

This is an odd claim. If you read the bill (H.R.1207), it simply amends existing law to say "under regulations of the Comptroller General, the Comptroller General shall audit" the Federal Reserve Board and its member banks.

The Comptroller General is a Senate-confirmed official who's also the Government Accountability Office (GAO), a legislative branch agency organized under the U.S. Congress. In other words, we're not talking about a political bomb-thrower, but a veteran civil servant tasked with important oversight responsibilities.

The argument for an audit has become stronger in the wake of the extraordinary and unprecedented steps the Federal Reserve has taken in response to the market turmoil that began two years ago. Among them: the Fed has printed hundreds of billions of dollars to purchase what are delicately called "troubled assets"; it has created mammoth Wall Street bailout funds with acronyms like CPFF and TALF; and it has done all of this without prior approval by the U.S. Congress.

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Federal Reserve Chairman Ben Bernanke is delivering his semi-annual Humphrey-Hawkins testimony about the economy before the House Financial Services Committee today and he will repeat the performance before the Senate Banking Committee tomorrow.

Investors and economists alike would like some indication that the emergency measures that the Fed took over the past year will eventually be reversed, lest those very actions start stoking future inflation. How exactly will the Fed stop pumping money into the economic system?

We discovered the answer in Bernanke's op-ed in today's Wall Street Journal. "The Fed's Exit Strategy" outlined a number of ways that the Bernanke and company plan to extract liquidity from the system. That's all well and good, but when does Bernanke think that will occur?

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With Federal Reserve Chairman Ben Bernanke's term expiring in January, the White House faces a big decision on whether to reappoint him.

Bernanke has taken hits among lawmakers for his handling of the federal bailout of the financial system, but he's enjoying solid support on Wall Street, according to a Wall Street Journal report Thursday ($).

Forty-three of 46 private sector economists support Bernanke's reappointment, according to a Journal poll, though some polled noted his decisions have not been flawless.

Bernanke supporters cite his bipartisan efforts to lift the country out of a severe financial crisis as well as a desire not to "change horses midstream." But his reappointment will require Senate confirmation, where he's drawm criticism from key figures on both sides of the aisle.

So as President Obama considers Bernanke's future, the Journal looked at some possible alternatives:

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Testifying before the before the House Budget Committee, Federal Reserve Chairman Ben Bernanke urged Congress and the Obama administration Wednesday to start plotting a strategy to curb record-high U.S. budget deficits.

"Even as we take steps to address the recession and threats to financial stability, maintaining the confidence of the financial markets requires that we, as a nation, begin planning now for the restoration of fiscal balance," Bernanke said.

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Bank of America CEO Kenneth Lewis told New York State regulators in February that he was ordered by Federal Reserve Chairman Ben Bernanke and former Treasury Secretary Henry Paulson not to discuss the deep problems emerging in its deal to acquire Merrill Lynch.

According to documents obtained by CBS News, Lewis told investigators Paulson and Bernanke threatened to have the Bank of America CEO and fellow management removed if they did not move forward with the troubled acquisition at the height of the financial crisis. Lewis was beginning to have second thoughts about the risk Merrill Lynch’s balance sheet might pose to Bank of America.

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Forget AIG. Focus on B-B-B or Bernanke's Big Bet.

The news that matters this week is the remarkable move by the Federal Reserve to purchase an additional $750 billion in mortgage-backed securities and another $300 billion of long-term U.S. Treasury bills.

It is a daring move that signals just how committed Federal Reserve Chairman Ben Bernanke is to kicking the housing market in the pants.

The Fed's commitment to buy massive amounts of mortgage-backed securities (a total of $1.25 trillion to date) is a huge step towards getting credit flowing in the real estate sector by creating a market for mortgage debt.

Make no mistake, the Fed's action will result in more mortgage and commercial real estate loans. Today, tomorrow and possibly for years to come.

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