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Why the Fed is sitting on its hands


Writing over at The Washington Post's new political economy blog, Neil Irwin looks at all the things the Fed could, but won't, do to kick-start the economy and bring down unemployment. The options include Ben Bernanke testifying before Congress on the need for further fiscal stimulus, buying up private-sector debt so banks have more money that they can use to lend, and cutting the rate it charges banks for emergency loans. But they might as well include Bernanke dressing in chaps and bringing a six-shooter to Wall Street. Barring a drastic change in circumstances, they're not going to happen.

So more interesting than all the things the Fed won't do are all the reasons it won't do them. Neil names two: The Fed does not believe we're in an emergency now, and it still sees the ultimate trajectory pointing towards recovery.

Let's take them in turn. First, the Fed's most aggressive actions would have to be justified under its emergency lending powers, which require "unusual and exigent" circumstances to be tapped. As Neil says, "So long as markets are functioning reasonably normally, as they are now, the Fed doesn't have the authority to intervene; it's hard to argue that a mere desire to push down various interest rates qualifies as 'unusual and exigent' circumstances."

Second, the Fed views recent declines in the economy "as relatively modest and as not warranting policy accommodation beyond that already in place." I've heard this view from a number of policymakers, including some in the administration. The economy isn't doing well right now, and the recovery is taking longer than anyone would like, but we are, nevertheless, recovering. If you take the expiration of census jobs out of the equation, we gained about 125,000 jobs this month. The fact that the policy is working slowly isn't a sufficient argument for the Fed to transform the way it intervenes in the economy in order to make it work faster.

To some degree, there's not a lot that can be done about this. The time to influence the Federal Reserve was when Obama had the opportunity to appoint its next chairman. He went with reappointing Bernanke, and doesn't appear to have gotten any policy concessions in the deal. I wouldn't be surprised if that was Obama's preference: Fed independence is somewhat fetishized in Washington, even though presidential appointment is built into the Fed precisely so political leaders have influence. But the reality is that the political system did not send a clear message to the Federal Reserve about the "full employment" portion of its mandate when it had the chance.

I'm interested by the nature of that "when" though. Obama announced Bernanke's reappointment in August of 2009. The economy was still losing about 200,000 jobs a month, the markets were still fragile, and the Fed was heavily invested in emergency measures to restore confidence and growth. If Bernanke's job was up next week, I wonder whether Obama would reappoint him again?

Photo credit: Larry Downing/Reuters.

By Ezra Klein  |  July 14, 2010; 3:10 PM ET
Categories:  Federal Reserve  
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Next: The public's incoherence on spending -- and spending cuts -- in one graph


USA Mega-Banks are not lending to USA businesses, they are hoarding money, Investing Overseas, and using it to place bets on Derivatives, Swaps, CDO’s Etc, and the Wall Street Journal reported that US businesses are sitting on $1.84 Trillion in liquid assets instead of investing in development and expansion.

The USA needs a National Clean Energy Deployment Bank to lend to emerging industries that are proven to create USA Jobs while addressing our most pressing needs; Job Creation, Manufacturing Products, Energy Independence, and Economic Security.

Target tax breaks towards USA Industries that create the greatest amount of USA Job growth. Put a modest $.50/gallon tax on gas to funds Roads and Infrastructure and create Jobs. Oil Companies make Hundreds of Billions every year and pay very little in Taxes. Forbes magazine reported/exposed Exxon paid "$0.00" in USA federal taxes in 2009. Now that's a sweet deal.

Posted by: Airborne82 | July 14, 2010 3:25 PM | Report abuse

this post has fear of drastic political losses written all over it.

A better title might have been:

"Why is the FED sitting on its hands when it knows Dems are about to have their heads handed to them in November??"

Just wondering Ezra if there's any history that shows of a previous FED that adjusted monetary policy to try to "make the economy look better than it is" for political gains for the party in power (or to limit its losses)?

Posted by: visionbrkr | July 14, 2010 3:34 PM | Report abuse

Let's assume the recovery is indeed solid and extreme joblessness is the new normal: at some point we have to stop calling the long-term jobless "99ers" and start calling them, well, something else... and doing something else.

Extending unemployment insurance handouts beyond pre-defined limits is a response based in part on pity -- a natural and pleasant yet illogical response which does nothing to correct (and unwisely masks) the underlying lack-of-jobs problem. It seems like the Obama/Pelosi Regime ought to spend a few of its busy moments giving at least passing attention to jobs, jobs, jobs.

Extending handouts makes me worry about the future of the PPACA. What if somebody buys the "bronze" plan, but later decides that "platinum" benefits would have been a better idea? Like a person who pays only "bronze" state (STUA) and federal (FUTA) unemployment taxes but later [when the sickness of unemployment hits] expects "platinum" benefits, will a person covered by a PPACA-approved health plan ultimately demand limitless benefits, with nobody willing to pay?

Repeatedly, Congress has demonstrated that the phrases "temporary benefit" and "defined benefit" are meaningless: short of Constitutional Amendment, there may be no way to control Congressional spending urges.

Posted by: rmgregory | July 14, 2010 3:36 PM | Report abuse

Interest rates are near zero and the financial system is relatively stable so the Fed sitting on their hands is no surprise. Excluding 'shock and awe' emergency actions, monetary policy affects the economy much slower than fiscal policy. Fed board members have very conservative outlooks as would be expected of central bankers. Their mindset is probably along the lines that if the elected politicians don't think there is a pressing need to act then it isn't the Fed's place to be proactive on economic growth.

If/when deflation kicks in, that's when the Fed will be forced to act (noted in the Slate article). China and the Latin American countries can buoy commodity prices and the global economy for only so long.

Posted by: tuber | July 14, 2010 3:49 PM | Report abuse

Isn't the problem quite obvious.

Ben Bernanke is not jumping to support the actions that would make Obama's policies successful.

Obviously he and everyone who doesn't support Obama is a racist.

Posted by: FastEddieO007 | July 14, 2010 3:50 PM | Report abuse

Good call, VB. I was going to type basically the same thing.

Posted by: novalifter | July 14, 2010 3:54 PM | Report abuse

Visionbreaker: I remember Paul Volcker keeping interest rates high to break the back of inflation, which probably helped Reagan win in 1980. Greenspan, OTOH, was slow to act in 1990 when the economy went into recession and Bush I lost. However Greenspan kept rates low be3fore the anticipated 2000 meltdown that didn;t happen and then may have kept them low for GW Bush. Some think Bush II delayed Greenspan's reappointment to get him to keep interest rates low to ensure his reelection.

The Fed seems to show a bias for Republicans, even though it is under Republicans (since 1980) that the deficits flourish and fiscal restraint goes out the window. But then, we all know tax cuts pay for themselves and don't contribute to the deficit, and if they do, deficits don't matter when they result from tax cuts. Reagan and Cheney taught us that.

Posted by: Mimikatz | July 14, 2010 4:06 PM | Report abuse

I think why Bernanke Fed is not doing anything is because Obama is taking 'arrows' of public wrath for Fed inaction (assuming that there are legitimate things which Fed can do, where I still have my doubts about).

Here is my answer to the question Ezra asks in this blog post:

Posted by: umesh409 | July 14, 2010 4:22 PM | Report abuse

I'm pretty sure Greenspan keeping interest rates low was helpful to Bush.

Posted by: mschol17 | July 14, 2010 4:28 PM | Report abuse

First of all, people got used to Greenspan speaking extemporaneously about issues he should have avoided. Bernake should not be talking about fiscal stimulus at all, any more than Geithner should be talking about monetary policy.

Second, banks are holding capital against assets that are probably marked too high on their books. If they were actually marked at market, that "surplus cash" would be eaten up as capital.

Last, the Fed has probably done as much as it can do to help the economy. Interest rates are zero, and they hold a ton of stuff on their balance sheet they shouldn't. The rest of the job of deleveraging has to be done by households and business. Once that process is complete, the economy will start growing again.

Posted by: sold2u | July 14, 2010 4:34 PM | Report abuse

@RMG:Extending unemployment insurance handouts beyond pre-defined limits is a response based in part on pity -- a natural and pleasant yet illogical response which does nothing to correct (and unwisely masks) the underlying lack-of-jobs problem.

I don't consider it pity, I consider it compassion for those who were thrown out of work because the plutocrats got too greedy and melted down the financial system.

Actually every dollar of unemployment spending results in $1.60 in economic activity, so unemployment spending is one of the best ways to stimulate employment, especially when there are 5 applicants for every job. Its not like unemployment benefits are keeping people from looking for work or taking the jobs that are offered. There are not enough jobs for those that want them.

Posted by: srw3 | July 14, 2010 4:35 PM | Report abuse

@U409: From your link...his bank nationalization call (flatly wrong). Personally I feel the right strategy for America's Economic challenges is:
- earn credibility / political capital by adopting austerity in reigning in entitlement costs (Medical Spending and Social Security at Fed level)

Social security is solvent for the next 30 or so years. Stop lumping it in with Medicare/medicaid.

Recommending austerity measures, which takes money out of the economy is the path to depression. Why would anyone who wants the economy to prosper do that?

In fact, bank nationalization would have been a far better solution that shoveling cash to the giant pig banks on wall st. A lot of plutocrats would have lost money when they didn't get 100 cents on the dollar for their crappy investment CDOs, MBSs, and other derivative trading.

Posted by: srw3 | July 14, 2010 4:43 PM | Report abuse

Ezra Klein wants Bernanke to do more to help Democrats. Everyone who reads this blog knows that Ezra's primary motivation is supporting the Democratic party in elections rather supporting what is in the best interest of secure and sustainable economic growth.

It appears to me that the independent Federal Reserve Board is making a reasonable analysis given all of the data they have. They are in a much better position to be analytical than people like Ezra Klein, Matt Yglesias, and Paul Krugman.

Posted by: lancediverson | July 14, 2010 4:44 PM | Report abuse

@LD: Ezra Klein wants Bernanke to do more to help Democrats.

EK wants Bernanke to do more to help the economy. The Fed is consistently missing its inflation targets. If inflation was higher than their projections, you know they would be tightening credit, but when inflation numbers consistently come in substantially lower than their targets, no action. That is bad policy, regardless of who is president. The fed is also charged with keeping unemployment in check. Another epic fail, but they do nothing to correct this failure...

Posted by: srw3 | July 14, 2010 5:15 PM | Report abuse

Agree with srw3.

The puzzle here is that the Fed is downgrading its forecast for the recovery, yet making no change in policy in line with the changed forecast.

Posted by: Patrick_M | July 14, 2010 5:19 PM | Report abuse

Having the Fed unexpectedly start intervening would spook the markets so much that the incremental benefit would be outweighed by the market reaction. The Fed is doing exactly what it should be doing - slowly extricating itself from the banking system and letting the economy recover normally.

The bond vigilantes are already nervous from the profligate spending in Washington. Every global macro hedge fund manager is either short treasuries or is waiting to short them. If bond investors get the idea that the Fed is not on their side with respect to fighting inflation, we will have a real problem on our hands. Not only that, but you will create more uncertainty, which is one of the main reasons why job creation has been so slow.

Realistically, the Fed has a lot of power to quell inflation. It doesn't have the same power to increase employment. The economy is recovering from a debt-fueled asset bubble and these recoveries take time. Spooking the markets just kicks more gasoline on the fire.

Posted by: sold2u | July 14, 2010 5:39 PM | Report abuse

"any more than Geithner should be talking about monetary policy."

What, monetary policy is off limits to the political process? Bernanke is the head of the Fed, he's not God. The Fed is not in the Constitution, it's got no constitutional role, it's a bank for Christ's sake, and whatever it does or doesn't do is fair grist for actual members of the Government.

Posted by: Bloix | July 14, 2010 5:40 PM | Report abuse

Until Congress enacts laws that bring the out-of-control private banking sector, a/k/a "The Federal Reserve" under strict regulation, we won't see anything from them.

Posted by: PCFerret | July 14, 2010 6:14 PM | Report abuse

QE without fiscal stimulus just goes to fatten the traders on WS. Bernanke probably doesn't do it because it would only add to the public rage over the excessive coddling of WS firms by the Fed and widens the gulf between the finance industry and the public. The Chinese central bank said it best recently when they said it only feeds inflation that widens the disparity between rich and the working class.

Posted by: leshoro | July 14, 2010 6:24 PM | Report abuse


your paranoia's getting the better of you.

"Some think Bush II delayed Greenspan's reappointment to get him to keep interest rates low to ensure his reelection."

it'd be nice if you have PROOF of this. You do know this is what Ezra is asking WHY isn't Obama doing? So is it BAD when Bush "supposedly" does it but GOOD if Obama did it?

You and the rest of your conspiracy theorists need to relax (that's you mschol17).

And Patrick, sold2u is right. The markets are absolutely spooked right now and will be for the forseeable future. Did you see them spike down today the moment the Fed report came out? When/if they did anything it would be followed by about a 500 point drop and we'd start accusing GS of selling short off the backs of pensioneers.

Posted by: visionbrkr | July 14, 2010 6:35 PM | Report abuse


For the record, I don't think that one need be a conspiracy theorist to think that it is possible that Bush held up the re-appointment of Greenspan in the hope that he would hold down interest rates.

Why? Because there were press stories at the time that reported just that, based on sources inside Bush's administration.

Here is a report from the Los Angeles Times:

I was not trying to argue for or against the Fed taking any action right now, I was merely noting the fact that they are making no changes in policy, while at the same time making a significant change (on the gloomier side) in their economic outlook. If doing nothing in response to a downgraded forecast is somehow reassuring to investors, then so be it. I surely don't claim to "understand" market psychology and I am generally skeptical about those who claim such an awareness, because I find that their predictions are so often wrong, both in the short and long term.

I am a bit surprised to see you doing the make-fun-of-people's names and all caps approach, vision. I hope you won't be making fun of me that way.

Posted by: Patrick_M | July 14, 2010 7:09 PM | Report abuse

Bloix wrote:

What, monetary policy is off limits to the political process? Bernanke is the head of the Fed, he's not God. The Fed is not in the Constitution, it's got no constitutional role, it's a bank for Christ's sake, and whatever it does or doesn't do is fair grist for actual members of the Government.


Too many cooks spoil the soup. The markets listen to one voice on the dollar (Treasury) and listen to one voice on interest rates (The Fed). Politicians do get to exert influence over the Fed - that's what Humphry Hawkins is for. To allow the Maxine Waters of the world to complain that interest rates are too high. Otherwise, having Treasury (or anyone else) send conflicting messages only makes the government look like the gang who can't shoot straight and undermines confidence.

Posted by: sold2u | July 14, 2010 7:26 PM | Report abuse


sorry but (and its no excuse on my part) but she's been butchering my name for as long as I can remember.

And sure its possible that Bush did that but if he or his senior staff did I'd agree they're WRONG. They shouldn't mix politics and policy when it comes to the economy and interest rates. I don't care if they're Dems, Republicans, Green Party, Socialists whatever.

Posted by: visionbrkr | July 14, 2010 7:26 PM | Report abuse


My linked story refers of course to Bush Sr.

In 2000, George W. Bush publicly stated that he favored an early re-appointment of Greenspan by Bill Clinton, based upon Bush's own stated belief that Greenspan might otherwise keep interest rates artificially low while awaiting re-appointment.

Then after Bush II was in office and reappointed Greenspan to his final term af-ter a long wait, it was widely reported that Wall Street analysts ("the market") believed that Bush kept him waiting for the same reason that Bush did not want Clinton to keep him waiting: Bush's personal belief that Greenspan would keep interest rates low for as long as he was unsure about his own future as Fed Chair.

So there is ample support for Mimikatz's "some think..." formulation of the possibility with respect to Bush II, and White House sources told journalists that it did happen under Bush I.

Posted by: Patrick_M | July 14, 2010 7:33 PM | Report abuse

So there is ample support for Mimikatz's "some think..." formulation of the possibility with respect to Bush II, and White House sources told journalists that it did happen under Bush I.

Posted by: Patrick_M | July 14, 2010 7:33 PM | Report abuse

How is "widely reported by Wall St analysts" ample proof?

Could it have happened, sure. Should it have happened, NO. Again political blinders need to be put on and in "X" months before an election Fed Chairs should have unlisted phone numbers (if you get what I mean).

No answer for Ezra's request for "policy concessions"? How irresponsible is that on his part and how irresponsible would it be on President Obama's part IF he had done it.

Posted by: visionbrkr | July 14, 2010 7:54 PM | Report abuse


Since a growing economy is good politics, it will always be hard to keep the independent Fed entirely free of the President's perceived need to coordinate public policy on the economy.

From the NY Daily News, April 23, 2003:

"The markets think the guy is God," one Bush adviser said.

Bush political sources said the President signaled his intentions well ahead of the 2004 campaign because he believes Greenspan's credibility will help inspire a rebound in the sluggish economy - the greatest potential threat to Bush's reelection hopes.

"A stock market rebound is key to an economic recovery, and, as far as Wall Street is concerned, Greenspan is the key to a market turnaround," a top GOP strategist said."

... & ...

The view from Wall Street about why Bush kept Greenspan (ABC Radio interview, May 19, 2004)

LEIGH SALES: Alan Greenspan has faced a lot of criticism in the wake of the bursting of the stock market bubble in 2000. How is it that he has managed to survive that?

THOMAS SCHLESINGER: Well, one way he's managed to survive is by running such supportive monetary policy for the Bush administration and by putting his imprimatur on the President's two massive tax cuts in 2001 and 2003.

Posted by: Patrick_M | July 14, 2010 7:59 PM | Report abuse


while I'll agree Bush at times can be . . . well you know, don't you think that IF Markets believed Greenspan to be a "GOD" (and btw I think they did and some still believe it) that it would incentivize Bush to APPOINT him and not hold it up?

Seriously (and I'm for once not being snarky here) am i missing something?

Posted by: visionbrkr | July 14, 2010 8:10 PM | Report abuse

"How is "widely reported by Wall St analysts" ample proof?"

Mimikatz said that "some think...." She did not that it happened, but instead that some think it happened.

There are many reports (from the time) of Wall Street analysts saying that they think just that, and (as I already pointed out) Bush was on record while campaigning against Gore urging Clinton to make an early re-appointment because of Bush's belief that Greenspan would hold rates below where they needed to be until he was re-appointed.

So we know that people did and presumably still do hold that opinion about Bush's delay in announcing his support for a 5th term for Greenspan, and there is a logical reason (coming straight out of Bush's mouth during the campaign, and his father's having done the same thing) as to wny a person might come to that conclusion.

So, what more proof do you need that "some think" that was Bush's motivation? Mimikatz didn't say it is what everybody thinks, or that it is a proven fact, she merely said some people hold that opinion. I don't see any reason why that should be portrayed as a "conspiracy theory" given all the facts presented above.

Posted by: Patrick_M | July 14, 2010 8:24 PM | Report abuse


I'm still not getting it (and maybe its me and if it is I apologize) but why would Bush (Republican) urge Clinton (Democrat) to do something that would help Gore (Democrat and Clinton's VP) in his campaign against Bush?

Some also think Obama wasn't born in the US. Doesn't mean they're not crazy. Some also think the Bush admin. purposefully was involved in 9/11, and Haliburton was complicit to make billions etc, doesn't mean they're not crazy.

Posted by: visionbrkr | July 14, 2010 8:33 PM | Report abuse

"Seriously (and I'm for once not being snarky here) am i missing something?"

I am hoping to avoid a tiresome recounting of the entire relationship between Bush II and Greenspan, but since you ask....

After Bush was elected, Greenspan's mystical reputation began to acquire some tarnish. He initially had a tense relationship with Bush largely because he made skeptical noises about the need for economic stimulus via the Bush tax cuts. Eventually he gave the cuts a lukewarm endorsement. He was also widely criticized for not having been more forceful in statements to cool down the dotcom bubble. His reputation was being tarnished among liberals as well...Krugman wrote the famous piece "The Maestro Slips Out of Tune" during this period.

So there was good reason to think that Bush might not reappoint him. But eventually Bush decided that he should reappoint him, (in order not to freak out Wall Street with a novice Fed Chair), but "some think" Bush delayed the announcement on the belief that Greenspan would be more inclined to be supportive of Bush tax policy, and would keep interest rates down, until he had secured a fifth term.

I don't know if that actually was Bush's thinking, but the narrative that a President perceives maximum leverage (even if completely unspoken) over Fed policy when a sitting Chairman is hoping to be reappointed certainly does not defy credibility.

And there is no doubt that "some think" that is exactly what took place, as Mimikatz has said.

Posted by: Patrick_M | July 14, 2010 8:40 PM | Report abuse

There is no real political independence. Every member of the FOMC has previously served in another position that reported directly to the White House or to Congress. The most common path to the FOMC Chairmanship is to serve first as the economic spokesman for the President as the head of the President's Council of Economic Advisors.

Posted by: leshoro | July 14, 2010 8:53 PM | Report abuse

"I'm still not getting it (and maybe its me and if it is I apologize) but why would Bush (Republican) urge Clinton (Democrat) to do something that would help Gore (Democrat and Clinton's VP) in his campaign against Bush?"

Because Bush argued that by NOT reappointing Greenspan, Clinton was keeping interest rates lower than the Fed Chair would have otherwise set them. So Gore (by Bush's own logic) was supposedly the beneficiary of an economy that was roaring along on overly-cheap (in Bush's own logic) money. If Clinton were to go ahead and name Greenspan for a 4th term ahead of time (so Bush thought), Greenspan would be free to raise interest rates to where they belonged, the economy would cool down, and Gore would have a more difficult time running on what had been the longest economic expansion in memory.

"Some also think Obama wasn't born in the US. Doesn't mean they're not crazy. Some also think the Bush admin. purposefully was involved in 9/11, and Haliburton was complicit to make billions etc, doesn't mean they're not crazy."

visionbrkr, these analogies are beneath you. This is not comparable to the birthers or the truthers. Bush 1's own people admit that he did the same thing. Why is the belief (by Wall Street analysts) that the son made the same calculation -given Bush II's own public statements during the campaign, about the Clinton re-nomination- compare to birthers and truthers?

The Fed Chair is appointed by the sitting President. It is a political appointment. The fact that any President might make the nomination in such a way that he or she thinks best serves his or her own economic policy goals (boosting market confidence, continuing loose monetary policy, or whatever) is hardly shocking to contemplate, and (at least to me) especially when we are considering the crew in power at the time (Rove, Cheney, et al).

Posted by: Patrick_M | July 14, 2010 8:56 PM | Report abuse


OK, I did misunderstand what you meant (re Bush as I didn't get it was an accusation or inferrence that he made in regards to Clinton's appt)I thought you were referring to Bush appointing Greenspan and I get your point now but again (and you've never answered this) doesn't President Obama risk the same thing? Didn't Ezra "ask" why didn't Obama politicize the appointment MORE for political gain?

My comparison to the birthers or truthers was not meant to be considered an equal comparison but just to point out that some people hold opinions that others consider outlandish. I also said "some" to both the birther and truther considerations and not "most" to either.

Oh and not to beleaguer this point any further because it warrants no further discussion so feel free to ignore this but MimiKatz said:

"Some think Bush II delayed Greenspan's reappointment to get him to keep interest rates low to ensure his reelection."

which does seem to differ from your explantion of what you expected she meant.

Also she said:

"The Fed seems to show a bias for Republicans"

which to me was the main basis for my "conspiracy theory rants"

Posted by: visionbrkr | July 14, 2010 9:43 PM | Report abuse


All true. My last thought for the night is that the times in my life when it seemed as though the Fed was working at cross purposes to the administration were unsettling times. As a citizen, one hopes that the people running the Fed see the economy and its challenges and solutions in roughly the same way as the team at Treasury and inside the White House.

Posted by: Patrick_M | July 14, 2010 9:50 PM | Report abuse

"Didn't Ezra "ask" why didn't Obama politicize the appointment MORE for political gain?"

Here is my understanding of Ezra's point.

Obama had to make a decision about whether to re-appoint Bernanke. Obviously, the decision hinged on several factors, but one vital factor was whether Fed policy under Bernanke would be in harmony with Obama's own philosophy and that of his team. Presumably the two men had some discussions. There may not have been a thorough exploration of policy specifics or "concessions" on economic strategies at that time, because the nature of the crisis was then so much worse, and Obama might have placed the highest value on reassuring markets with a known quantity and an experienced hand.

So Ezra wonders if there was an adequate vetting on policy philosophy, and whether Obama would have made the same decision if he knew then what he knows now.

At least that is how I interpret it.

I don't see any of this political stuff as necessarily evil. Presidents have the right to name Fed Chairs that they think will have economic philosophies consistent with their own, and once appointed the Chair has the power to form monetary policy independently. If a Fed Chair wants a new term, a President might believe that the Fed Chair will be more inclined to enact policy that supports the President's interests, but I suspect that is usually wishful thinking. I think that even though they don't get a lifetime appointment like SCOTUS Justices, Fed Chairs tend to care only about their own legacy and stay relatively independent in their thinking, once appointed, like SCOTUS.

The President really has one shot to get it right, and Ezra wonders if Obama's got a case of buyer's remorse.

G'night, visionbrkr.

Posted by: Patrick_M | July 14, 2010 10:23 PM | Report abuse


For tomorrow . . . the interesting question is would he have had that buyers remorse if unemployment had been at, say 8% and dropping? Or even better if it had been at 8% but that number was arbitrarily lower based upon employees leaving the workforce? I'm not cynical of Obama so I don't think it would be but its an interesting question to ponder.


Posted by: visionbrkr | July 14, 2010 10:52 PM | Report abuse


I don't know that there IS any buyer's remorse, all any of us can do is speculate about whether Obama is pleased or displeased with Fed policy, and Bernanke's job performance. My impression of Obama is that he takes the long view on everything, and so I doubt that Obama is losing any sleep over the Fed "sitting on its hands" this month.

For whatever it is worth, if unemployment had peaked at around 8%, I actually don't think the climate would be all that different right now. We'd all still (rightly) think unemployment was unacceptably high, we'd still all be wishing it was coming down faster, and we'd still be having similar policy debates. Tea partiers would still have pushed the storyline that Obama is a socialist, the Senate would still be dysfunctional, the Deepwater Horizon still would have blown, and the Republicans would still be pushing tax cuts as the panacea for all bad things.

We are in a fairly typical negative environment for a new President 2 years in, magnified somewhat by the size of the mess he walked in to.

Posted by: Patrick_M | July 15, 2010 12:13 AM | Report abuse

Bernanke was summoned to the white house like Elmendorf was about nine months ago -- to get his head straight. We'll see if he falls into line. Ultimately, the administration attempts to intimidate everyone who has an independent role. They tried it with the supreme court. ha! We'll see if the Fed can be shut up.

Posted by: truck1 | July 15, 2010 7:45 AM | Report abuse

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