A hard day at the Reserve
December 2010
A hard day at the Reserve
As Chairman of the Federal Reserve, Ben Bernanke seems to have no friends, hardly any backers and a hoard of analysts ready to dissect every word the poor guy speaks.
Ben has been discussing and debating policy with members of the Federal Open market Committee (FOMC) as they make key decisions about our interest rates and growth of our money supply and economy.
Recent criticism is based on this November’s announcement that the Fed would begin QE2- aka-Quantitative Easing – Round 2. This newest round is meant to compliment QE1 that began in the free fall days after Lehman Brothers collapse in September 2008.
In the first round of QE, the Fed announced it would buy up to $600 billion of direct obligations of Fannie Mae, Freddie Mac and the Federal Home Loan Banks, and mortgaged backed securities (MBS) backed by Fannie, Freddie, Ginnie Mae. Thankfully, QE1 worked in keeping our financial system from collapsing. (What to do about Fannie and Freddie is another huge issue)
According to the November 3, 2010 Federal Reserve’s press release, it notes that based on the slow pace of our economic recovery and “to help ensure that inflation, over time, is at levels consistent with its mandate (to foster maximum employment and price stability), the Committee decided today to expand its holdings of securities.”
The FOMC will be buying a “further $600 billion of longer –term Treasury securities by the end of June, 2011 or about $75 billion per month. Their goal is/was to lower interest rates.
Stay tuned as QE2 works its way through the bond and stock markets, the economy, pundits and politicians.
