Saudis press United States to put an end to rate cuts

[spindrifter]

From The Sunday Times
June 29, 2008

Irwin Stelzer
SO the Federal Reserve Board’s monetary policy committee (technically, the Federal Open Market Committee, or FOMC) has decided to leave interest rates as they are - which is far less important than how it arrived at that decision. What follows is a combination of hard fact and my own surmise, mixed together so as to shield the usual highly placed, reliable source.

There is something called “the Fed family”. It’s not as shady as a mafia family, but far more powerful. Members include chairman Ben Bernanke and the six other members of the board of governors, appointed by the president; the presidents of the 12 regional Fed banks, five of whom serve on the FOMC; and several influential alumni who are frequently consulted by Bernanke and the White House, and whose public utterances Bernanke cannot ignore.

In times like these - when recession looms, inflationary pressures are rising, and a lot of banks are, er, teeter-tottering - many of the family members weigh the several dangers differently. Some worry about rising unemployment, and want to keep interest rates low. Some worry more about inflation, and want to raise rates. Others worry about the health - or lack of it - of the banks, and favour the sort of open-handed policy that Bernanke has adopted to provide liquidity to the banks. Still others worry that bank bail-outs will create the moral hazard that the Bank of England’s Mervyn King so fears, and produce even more reckless lending behaviour. Gone are the good old days when benign economic conditions led to virtual unanimity of views.

So far, so obvious. But two things are not so obvious. The first is the intensity of the battle within the Fed family. That has an advantage: Bernanke benefits from a wide range of views, which he says he welcomes. The board of governors generally worries most about the soundness of the banking system. The presidents of the regional banks, selected by local businessmen and bankers, generally worry more about inflation than anything else, which is why the presidents of five Fed regional banks have opposed recent rate cuts. The members of the FOMC worry about everything. And the alumni sit on the sidelines, rather like inlaws, sniping or supporting the chairman, depending on their view of each of his actions. Not a bad system, even if it is a bit messy.

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http://business.timesonline.co.uk/tol/business/columnists/article4232162.ece

[TheFarseer]

1. word is they're going to raise them soon

about time. forget those Wall Street dickheads. I own stocks and I still say forget them and forget me. It's pushing oil up and everything up for that matter. If our economy is based on interest rate cuts, we're fucked already. Better to just let us take our medicine and get it over with. Quit acting like a recession is the worst thing that could ever happen to the country. It's the natural business cycle. Once we get all this crap worked out, we can have the fundamental economic situation for another boom and not some artificial boom built on inflated home prices, or borrowing money to buy stocks or a tulip bulb fetish.

arggg, I gotta read my posts before I post them.

[bemildred]

2. Tsk, you forget, the election is still months away ...

It's not time to wake the sheeple up yet.

[Arctic Dave]

3. Too bad it takes a plan and vision to

get us out of this mess. Two things our "leaders" have been missing for a while.