Fed Vice Chair Ferguson resigns

[Rose Siding]

WASHINGTON (Reuters) - U.S. Federal Reserve Vice Chairman Roger Ferguson announced on Wednesday he will step down effective April 28, in a surprise announcement that comes at a time of upheaval at the central bank.

"My service on the board has been rewarding and stimulating, and it is now time for me to pursue other professional opportunities," he said in a letter to President George W. Bush dated February 22.

The Fed, in a separate statement, said Ferguson will not attend the March 27-28 meeting of the policy-setting Federal Open Market Committee.

Ferguson's term on the Fed board does not expire until January 31, 2014. He leaves before the new Fed chief Ben Bernanke, chairs his first policy meeting.

The last Democrat on the Fed's board, Ferguson joined the central bank in November 1997. First nominated for an unexpired term on the Fed board by President Bill Clinton, the Harvard University-trained lawyer and PhD economist was elevated to the second highest post in October 1999.

http://www.washingtonpost.com/wp-dyn/content/article/2006/02/22/AR2006022200996.html

From the AP report:

WASHINGTON -- Federal Reserve Governor Roger Ferguson, who played a key role in shepherding the nation's financial system through the 2001 terror attacks, announced Wednesday that he will leave the central bank near the end of April.
...
The opening will give President Bush another chance to further his imprint on the central bank. Bush picked the Fed's new chairman, Ben Bernanke as well as two other new members_ Randall Kroszner and Kevin Warsh.

http://www.washingtonpost.com/wp-dyn/content/article/2006/02/22/AR2006022201136.html

[phoebe]

1. more likely that the * admin. made life very uncomfortable in order

to make sure that this happened..

[bananas]

7. ""all seven Fed governors will have been chosen by President Bush"

"With Ferguson's departure, all seven Fed governors will have been chosen by President Bush."
http://www.movermike.com/posts/1140626779.shtml

[WhiteTara]

10. great...money policy by blundering cronies

we can expect a deep depression to come soon.

[acmejack]

2. Financial mavens, should we read anything into this ?

[Viva_La_Revolution]

4. I'm no expert

but I say this not good. :(

[Canuckistanian]

3. I'd like to see Krugman's opinion on this

Damn that NYT firewall...

[livvy]

9. His past Op-Eds are posted here, just a day or two after....

being published in the Times. Click on the "comments" section under the title to read it. I don't think the website owner wants anyone to post the columns at other sites, but you can at least read them.

From the site: " In addition, I am afraid that I will get in trouble from this point on, if readers post the TimesSelect columns by Paul or the other Times writers on the Haloscan or Hotboards forums, so I would be grateful if you did not do that.

As far as I know, the rest of the site outside of the Columns Section will stay in tact, and I will update them regularly."

http://www.pkarchive.org/

[Canuckistanian]

11. Thanks!

I've never heard of this site before.

[wordpix]

13. thanks, interesting stuff, love this part about "the Bush-Cheney way:"

snip: "That's the Bush-Cheney way: decide on your conclusions first, then demand that analysts produce evidence supporting those conclusions."

http:// economistsview.typepad.co...krugman_de.html
snip:

Debt and Denial, Commentary, by Paul Krugman, NY Times: Last year America spent 57 percent more than it earned on world markets. That is, our imports were 57 percent larger than our exports. How did we manage to live so far beyond our means? By running up debts to Japan, China and Middle Eastern oil producers. ... Sometimes large-scale foreign borrowing makes sense. ... But this time our overseas borrowing isn't financing an investment boom: ... business investment is actually low by historical standards. Instead, we're using borrowed money to build houses, buy consumer goods and, of course, finance the federal budget deficit.

In 2005 spending on home construction as a percentage of G.D.P. reached its highest level in more than 50 years. People who already own houses are treating them like A.T.M.'s, converting home equity into spending money: last year the personal savings rate fell below zero for the first time since 1933. And it's a sign of our degraded fiscal state that the Bush administration actually boasted about a 2005 budget deficit of more than $300 billion, because it was a bit lower than the 2004 deficit.

It all sounds unsustainable. And it is. Some people insist that the U.S. economy has hidden savings that official statistics fail to capture. I won't go into the technical debate about these claims ... except to say that the more closely one looks at the facts, the less plausible the "don't worry, be happy" hypothesis looks.

Denial takes a more systematic form within the federal government... Last week Mr. Cheney announced that a newly created division within the Treasury Department would show that tax cuts increase, not reduce, federal revenue. That's the Bush-Cheney way: decide on your conclusions first, then demand that analysts produce evidence supporting those conclusions.

But serious analysts know that America's borrowing binge is unsustainable. ... So how bad will it be? It depends on how the binge ends. If it tapers off gradually, the U.S. economy will be able to shift workers out of sectors that have benefited from the housing boom and ... into sectors that produce exports or replace imports. Given time, we could bring the trade deficit down and bring housing back to earth without a net loss in jobs.

In practice, however, a "soft landing" looks unlikely, because too many economic players have unrealistic expectations. This is true of international investors, who are still snapping up U.S. bonds ... seemingly oblivious both to the budget deficit and to the consensus view ... that the dollar will eventually have to fall 30 percent or more to eliminate the trade deficit.

It's equally true of American home buyers. Most Americans live in regions where housing remains affordable. But ... most of the rise in housing values has taken place in a "bubble zone" along the coasts, where housing prices have risen far more than the economic fundamentals warrant. ... houses in the bubble zone are overvalued by between 35 and 40 percent, creating trillions of dollars of illusory wealth.

So it seems all too likely that America's borrowing binge will end with a bang, not a whimper, that spending will suddenly drop off as both the bond market and the housing market experience rude awakenings. If that happens, the economic consequences will be ugly. All in all, Alan Greenspan, who helped create this situation, can consider himself lucky that he's safely out of office, giving briefings to hedge fund managers at $250,000 a pop. And his successor may be in for a rough ride. Best wishes and good luck, Ben; you may need it.

[no_hypocrisy]

5. I think he knows something is going to happen and he doesn't want it on

his shift . . .

[fasttense]

6. Bernanke and bush are up to something.

Ferguson wants no part of it. Stand ready for another big mess.

[gasperc]

8. hopefully he leaks stuff out so counter-measures could be implented

like the democratic opposition will have mush clout but the way the GOP is reacting to this Dubai port deal mess they may be forced to react to press stories about ominous signs in the economy.

I don't want to relive the 30's no matter how much it increases our chances of taking over congress.

[wordpix]

12. maybe he knows something about Snowjob-Dubai Ports he's gonna leak

[cosmicdot]

14. and, the Kevin Warsh Fed pick has drawn criticism

"Campaign disclosures show that Warsh gave $1,000 to Bush's 2000
election campaign and $1,000 to his 2004 re-election bid. Warsh is
married to Jane Lauder, a granddaughter of cosmetics pioneer Estee
Lauder; Jane Lauder's father, Ronald Lauder, was U.S. ambassador to
Austria under President Ronald Reagan and has donated $104,000 to
the Republican National Committee since the 2000 election campaign,
according to records compiled by the Center for Responsive Politics,
a research group in Washington."


"for the first time in recent decades, and maybe the first time
ever, the board would include three governors who recently served in
the administration that appointed them."' That, he
said, "unavoidably make the board a more political cast."



add another to the crony count - we're being sold down the river by the good ol'boy network
...........................................................................................


"Bu$h's Nomination of Warsh to Fed Draws Criticism and Confusion"


~snip~

Bush's nomination of the 35-year-old White House aide -- a lawyer by training who would become one of only two members of the Fed's seven-member board of governors without a Ph.D. in economics -- has been greeted by criticism and bewilderment by some former Fed officials and economists. They point to his political connections and inexperience, and say the White House could have found a better-known, more qualified choice.

``Kevin Warsh is not a good idea,'' said former Fed Vice Chairman Preston Martin, who was appointed by Ronald Reagan in 1982. ``If I were on the Senate Banking Committee,'' which must approve Fed
nominees, ``I would vote against him.''

``The Warsh nomination came out of left field,'' said Tom Schlesinger, executive director of the Financial Markets Center, a Howardsville, Virginia-based group that monitors the Fed.

The nomination of Warsh, who has been executive secretary of the president's National Economic Council, was one of two that Bush made on Jan. 27 to fill vacancies on the Fed. The other nominee, Randall Kroszner, 43, is a University of Chicago professor and a former Fed
visiting scholar with a doctorate in economics from Harvard University.

~snip~

http://www.bloomberg.com/apps/news?pid=10000103&sid=a76b9kj07yPM&refer=us

[Rose Siding]

15. WP: Bernanke, "untested in crises", was expected to draw on Ferguson-

snip>
Bernanke, a former economics professor and White House adviser, is untested in crises, noted several analysts who had expected the new chairman to be able to draw on Ferguson's experience if the stock market crashed, the dollar plummeted or some other turbulence erupted.

During the 2004 presidential race, many analysts viewed Ferguson, a Democrat, as a strong candidate to succeed Greenspan if Sen. John F. Kerry (D-Mass.) were elected president. In October, Bush tapped Bernanke, a Republican, to head the central bank.
....
Fed policy also is in flux. Fed officials are discussing how much higher to raise their benchmark short-term interest rate after lifting it steadily since June 2004 to keep inflation contained. Central bank officials also are debating whether to adopt a numerical target for inflation, as Bernanke has long advocated, and whether to take further steps to make the Fed's actions and deliberations more open to the public.

"The timing is a little awkward, losing both the chairman and vice chairman in short order," said Ethan S. Harris, chief U.S. economist at Lehman Brothers. The Fed board is "becoming a fairly inexperienced group as people keep peeling off."

http://www.washingtonpost.com/wp-dyn/content/article/2006/02/22/AR2006022201136.html

Here's another fine mess :(

[rooboy]

16. I'd be getting off that train at the next station too.

"Helicopter Ben" Bernanke is about to oversee the collapse of the dollar and the demise of the housing bubble. Anybody with any sense is getting the hell out of Dodge.

[lovuian]

17. He has had enough of the Bull!!! He's outa there

This doesn't bode well for the future does it!!! All Republicans...

Bush has purged the whole system!!!