Recession

CHART OF THE DAY: 50% Chance Of Another Recession... Because Of The Euro

Brian Beutler | November 15, 2011, 1:46PM

Here's why you should be worried about the spiraling demise of the Euro.

Travis J. Berge, Early Elias, and Oscar Jorda, Economists at the Federal Reserve Board of San Francisco, have analyzed the domestic and international factors that threaten the American economy. What they found suggests that the risk of another recession in the next several months is alarmingly high -- and largely out of our control. Downside risks within the U.S. are pretty low, but taken together with external factors, particularly the escalating crisis in Europe, the likelihood of another U.S. recession jumps above 50 percent.

Here's the graph:

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Stimulus

Goldman Sachs To Federal Reserve: Boost The Economy Already

Brian Beutler | October 17, 2011, 2:50PM

Economists and monetary policy wonks have been screaming about this for months -- sometimes at each other. Now economists at investment giant Goldman Sachs are on board. In a proprietary analysis for clients, Goldman economists Jan Hatzius and Sven Jari Stehn say the Federal Reserve should announce publicly that it will pursue a bit of inflation, and make good on that goal with looser monetary policy -- a new round of so-called "Quantitative Easing."

From the analysis: "[W]e believe that the Fed's most promising option for delivering significant further policy easing would be a shift to a nominal GDP level target coupled with large-scale asset purchases.

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Mint

House Republicans Want To Replace $1 Bill With Gold-Plated Coins

Ryan J. Reilly | September 27, 2011, 3:08PM

Some House Republicans have proposed a bill which would kill the 1-dollar bill and replace it with a mandated dollar coin, The Hill's Peter Kasperowicz reports.

Rep. David Schweikert (R-AZ) and two other House Republicans introduced the Currency Optimization, Innovation and National Savings (COINS) Act last week, saying the U.S. would save $184 million a year by moving to the dollar coin.

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Federal Reserve

House Republicans Join Fed-Bashing Counterparts On Campaign Trail

Brian Beutler | September 22, 2011, 6:20AM

Rep. Jeb Hensarling (R-TX)

Politicians hectoring the Federal Reserve is nothing new. Members of both parties have done it based on disagreements over myriad financial and economic issue over the years. In that way Tuesday's letter from GOP leadership to Fed Chairman Ben Bernanke, warning him against pursuing more monetary stimulus, was part of a storied American tradition.

In other ways it was extraordinary. This came from leaders speaking for an entire party, and more-than-plausibly represents an effort to prevent the Fed from improving the economy for political reasons.

In the end, the effort proved ineffective -- the Fed announced a new round of monetary stimulus as expected. But it exposed a widening rift between the GOP and the Fed, which until now had been limited to posturing GOP primary candidates and fringe members of the GOP caucus.

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Ben Bernanke

Federal Reserve To GOP: Take A Hike!

Brian Beutler | September 21, 2011, 2:40PM

Federal Reserve Chairman Ben Bernanke

Responding to the bleak economic outlook, and the weak prospects for reduced unemployment in the months ahead, the Federal Reserve has announced a new round of monetary stimulus, disregarding a Republican political push to dissuade them from tinkering with the economy.

In a new iteration of Quantitative Easing -- that Fed watchers are calling "Operation Twist" -- the Federal Reserve will swap $400 billion worth of medium term bonds for longer term bonds over the next nine months,to drive down long-term interest rates to encourage immediate investment. Separately, it will take steps to drive down mortgage interest rates.

It's the first significant action the Fed has taken to juice the economy since a modest second round of monetary stimulus ended several months ago. However, the Fed says it continues to expect unemployment to drop slowly and for inflation to remain below the target rate -- meaning it isn't attempting to spur immediate spending and investment by raising the expectation that prices will soon rise. Though the hope is that the new easing will accomplish that on its own.

Politically, the action is sure to rankle Republicans, both in the presidential primary, where chairman Ben Bernanke has become a whipping boy, and on Capitol Hill, where leaders have more cautiously criticized Fed policy.

Read the full Fed statement below the fold.

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Ben Bernanke

GOP Leaders To Bernanke: Don't Try And Improve The Economy Again

Brian Beutler | September 21, 2011, 8:59AM

House Speaker John Boehner (R-OH) with Senate Minority Leader Mitch McConnell (R-KY)

House and Senate GOP leadership are taking fire from all sides for publicly pressuring Federal Reserve chairman Ben Bernanke not to further loosen monetary policy, even if he thinks it will help the economy.

In a Tuesday letter to Bernanke, leaked to the press, Sens. Mitch McConnell (R-KY) and Jon Kyl (R-AZ), and House Speaker John Boehner (R-OH) and Majority Leader Eric Cantor (R-VA), ostentatiously cautioned Bernanke against providing the economy any further monetary stimulus.

"[W]e submit that the board should resist further extraordinary intervention in the U.S. economy, particularly without a clear articulation of the goals of such a policy, direction for success, ample data proving a case for economic action and quantifiable benefits to the American people," the Republicans write.

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Ben Bernanke

Bernanke Slams Congress For Harming Economy With Debt Limit Brinkmanship

Brian Beutler | August 26, 2011, 10:48AM

Federal Reserve Chairman Ben Bernanke

In a speech that sent stock prices tumbling, Fed Chairman Ben Bernanke announced the central bank will not take bold new steps to stimulate the economy -- at least not yet. But he also ripped Congress for failing to do its part to combat unemployment with fiscal policy, and blamed brinkmanship over the debt limit for exacerbating the situation.

"Bouts of sharp volatility and risk aversion in markets have recently re-emerged in reaction to concerns about both European sovereign debts and developments related to the U.S. fiscal situation, including the recent downgrade of the U.S. long-term credit rating by one of the major rating agencies and the controversy concerning the raising of the U.S. federal debt ceiling," Bernanke said at an annual Fed symposium in Jackson Hole, Wyoming. "The negotiations that took place over the summer disrupted financial markets and probably the economy as well, and similar events in the future could, over time, seriously jeopardize the willingness of investors around the world to hold U.S. financial assets or to make direct investments in job-creating U.S. businesses."

Don't do that again, he's warning. Except that top Republicans now say taking the debt ceiling hostage will be the new normal.

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Rick Perry

Former Reagan Official: 'Rick Perry's An Idiot'

Brian Beutler | August 19, 2011, 10:00AM

Ronald Reagan's chief domestic policy adviser took Texas governor Rick Perry to the woodshed Friday for recent controversial statements -- in particular about his suggestion that Fed Chairman Ben Bernanke would be committing treason by printing money to boost economic growth.

"Rick Perry's an idiot, and I don't think anyone would disagree with that," Bruce Bartlett said on CNN's American Morning.

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Mitt Romney

Perry's Fed Fight Dangerous Territory For Romney

Benjy Sarlin | August 16, 2011, 10:23AM

Mitt Romney

Rick Perry's tough words for Ben Bernanke Monday weren't just idle talk. By going after the Federal Reserve, he immediately brings to the forefront one of the few major policy distinctions between him and Mitt Romney.

A successful investor who is well-versed in monetary policy, Romney has been extremely wary about joining in on the Republican party's populist revolt against the Federal Reserve over the last two years. Perry, by contrast, is clearly all too happy to ride the anti-Fed tide, perhaps making a play for some of the Bernanke haters more naturally drawn to Ron Paul.

As recently as April of this year, well after Tea Partiers had taken to vilifying Bernanke as the face of the 2008 bailout, Romney defended the Fed Chair in an interview with CNBC's Larry Kudlow after being repeatedly pressed to criticize him for "depreciating the dollar."

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Federal Reserve

Fed: No Major Action Yet To Improve Sucky Economy

Brian Beutler | August 9, 2011, 2:48PM

Federal Reserve Chairman Ben Bernanke

Between a stalled recovery in the United States, a major debt crisis in Europe, fallout from the earthquake in Japan, a recent fuel price spike, and gridlock in Washington where legislators have reached consensus in favor of austerity measures, speculation had climbed over the last several days that the Federal Reserve would intervene by buying up a significant amount of assets, injecting money into the economy -- a new round of so-called "Quantitative Easing".

But in a statement after a regular meeting of the Fed's Open Market Committee, the central bank decided to continue its current policies, with the caveat that they might start loosening those policies if things don't improve quickly.

Here's their assessment of the weak state of the economic recovery. "[E]conomic growth so far this year has been considerably slower than the Committee had expected. Indicators suggest a deterioration in overall labor market conditions in recent months, and the unemployment rate has moved up. Household spending has flattened out, investment in nonresidential structures is still weak, and the housing sector remains depressed. However, business investment in equipment and software continues to expand. Temporary factors, including the damping effect of higher food and energy prices on consumer purchasing power and spending as well as supply chain disruptions associated with the tragic events in Japan, appear to account for only some of the recent weakness in economic activity."

But though unemployment remains significantly higher than the Fed's employment mandate requires, they're not really ready to intervene in a major way just yet. "The Committee discussed the range of policy tools available to promote a stronger economic recovery in a context of price stability. It will continue to assess the economic outlook in light of incoming information and is prepared to employ these tools as appropriate."

Full statement below:

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Stimulus

Republicans Try To Roll Back Fed's Job Creation Mandate

Brian Beutler | November 17, 2010, 9:45AM

Sen. Bob Corker (R-TN)

A growing number of Republicans want to tie the hands of the Federal Reserve, choking off perhaps the last best hope for a speedier economic recovery.

In a sluggish economy like this one, policy makers have a handful of powerful tools at their disposal. The most conventional tool -- fiscal stimulus -- is politically out of reach. Republicans, led by Senate Minority Leader Mitch McConnell, have vowed to block any more deficit spending bills aimed at injecting demand into the economy.

"[W]e will loudly oppose future stimulus bills that only stimulate the deficit," McConnell said at a recent Heritage Foundation speech.

That leaves monetary stimulus. Under its mandate to promote full employment, the Fed is supposed to use tools at its disposal to spur economic growth. Republicans want to stop that too.

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Recession

The Democrats' Recession Problem (And Why It Won't Get Fixed Anytime Soon)

Brian Beutler | August 27, 2010, 10:51AM

According to the Commerce Department this morning, the country's gross domestic product this spring grew at an anemic 1.6 percent. But that's just the latest in a series of indications that the economy isn't really improving. Forget mosques and immigration and health care reform -- they may split the country and bedevil Democrats politically, but it's the economy that's really to blame for all of it. The good news is, there are steps the government can take to improve the situation. The bad news is they're not gonna. And that's why Democrats are suffering.

"It's very difficult to envisage any significant policy response to current economic problems in the near term," said Mark Zandi, one of the nation's top economists, earlier this week.

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Federal Reserve

The Can't-Do Agenda: Six Initiatives The Senate Scrapped Ahead Of Their Recess

Brian Beutler | August 9, 2010, 8:47AM

Senator Harry Reid (D-NV), Senator Dick Durbin (D-IL)

In the rush to close up shop for August recess, the Senate had one of its most productive days in recent memory Thursday. In a matter of hours, they passed a state aid bill, confirmed Elena Kagan to the Supreme Court, confirmed dozens of other Obama nominees, including James Clapper as Director of National Intelligence, passed a border security bill, child nutrition legislation, and more.

Underneath all that, though, is a growing pile of initiatives that the Senate failed to take up. Here are the top items on the agenda the Senate didn't check off before adjourning.

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Financial Reform

Progressives Drive Hard Bargain On Wall Street Bill

Brian Beutler | May 11, 2010, 1:27PM

Sen. Ted Kaufman (D-DE)

At just about every stage of the Senate financial reform process, the changes to the bill have trended towards the left--and that may well be borne out again if Democrats successfully add provision to the bill that will, among other things, ban big banks from using their own capital to engage in market speculation.

The provision is called the Volcker Rule--named after former Fed Chair Paul Volcker who now heads the President Obama's Economic Recovery Advisory Board. Currently, two Democratic senators--Carl Levin (D-MI) and Jeff Merkley (D-OR)--are pushing to add the rule to the Wall Street reform legislation and have built up quite a head of steam. That development was not a sure thing even a few days ago but with the political climate so anti-Wall Street even progressives' failures can turn into successes, which is what sort of happened with the Volcker Rule.

Last week, Sens. Sherrod Brown (D-OH) and Ted Kauffman (D-DE) pushed hard to get their very progressive 'too big to fail' amendment passed. Even though it failed it helped pave the way to enshrining the Volcker rule in the bill.

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Financial Reform

Wall Street Reform Takes A Populist Turn

Brian Beutler | May 6, 2010, 7:09PM

Sen. Bernie Sanders (I-VT)

Anti-Wall Street sentiment is so strong and Republicans have such a weak hand that Democrats in the Senate are suddenly finding themselves strengthening the financial reform bill with new amendments and beating back GOP attempts to weaken it.

The latest evidence of this populist surge is that the Senate is now expected to adopt an amendment, authored by Sen. Bernie Sanders (I-VT), that will require an audit of all of the Fed's emergency lending activities, starting in late 2007.*

Sanders' success in winning support for his amendment is emblematic of the greater debate over financial reform, which has, thanks to the Democrats' aggressive political posture, and the unpopularity of Wall Street, been much more favorable to progressives, even over the objection of powerful interests.

The Sanders measure is similar to a Fed audit proposal that was included in the House's financial reform legislation, which passed last December, and should simplify the process of ironing out the differences between the two bills in a conference committee.

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Audit the Fed

Sanders' Fed Audit Amendment Likely To Prevail

Brian Beutler | May 6, 2010, 4:24PM

Sen. Bernie Sanders (I-VT)

Could Sen. Bernie Sanders (I-VT) shake off powerful opponents of his proposal to audit the Federal Reserve? It looks like he's about to do just that. By making a few changes to his financial reform amendment, Sanders has won support from Senate Banking Committee Chairman Chris Dodd, and Majority Leader Harry Reid, and seems more poised than ever to prevail. The Senate should vote on his amendment later today.

In order to allay some of the White House's and the Fed's concerns, Sanders has agreed to limit the scope of what the Government Accountability Office would be allowed to audit--but his plan will still require thorough review of all the Fed's emergency lending, beginning December 1, 2007.

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Audit the Fed

Dis! Sanders Learns Of White House Plans To Kill Fed Audit In New York Times

Brian Beutler | May 6, 2010, 12:49PM

Sen. Bernie Sanders (I-VT)

Sen. Bernie Sanders (I-VT) keeps hearing from Rahm Emanuel about his proposal to force a comprehensive audit of the Federal Reserve. But the White House isn't calling to tell him about new plans to kill his amendment.

The White House is hoping to cobble together a separate proposal, to be offered as an alternative to Sanders' backers. The so called "side-by-side" would give them cover to vote down the Fed audit amendment, by offering them them a weaker plan to support.

But Sanders had to read about this plan in the newspaper.

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Audit the Fed

Deal Killer? White House Takes Aim At Fed Audit Provision

Brian Beutler | May 4, 2010, 10:37AM

President Barack Obama, Federal Reserve Board Chairman Ben Bernanke, and Sen. Bernie Sanders (I-VT)

Possibly today, but if not today then soon, the Senate will decide whether or not to follow the House's lead and adopt a provision requiring government auditors to open up the books at the Federal Reserve. The measure enjoys a great deal of popularity on both the left and the right, but is so fiercely opposed by powerful interests that it could nonetheless become a stumbling block in the way of financial regulatory legislation.

Right now Sen. Bernie Sanders (I-VT) is trying to round up 60 or more votes to overcome a likely filibuster and include an "audit the Fed" provision in the Senate's bill. There are just a few small obstacles: the White House, major financial institutions, and the Fed itself. Their resistance is fierce--but the measure is so popular that killing it will be difficult for them and that, in their eyes, threatens to put a grenade at the center of efforts to to tighten the rules on Wall Street.

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Financial Reform

The Top 4 Things To Watch In The Senate Floor Debate On Financial Reform

Brian Beutler | May 3, 2010, 9:04AM

Rep. Barney Frank (D-MA), Senate Majority Leader Harry Reid (D-NV) , Speaker of the House Nancy Pelosi (D-CA) and Sen. Christopher Dodd (D-CT)

The next few days will likely determine how smoothly the White House's push to strengthen the rules governing Wall Street will go down. Starting early this week, the Senate will begin voting on amendments to the Democrats' proposed financial regulatory reform bill. Republicans will get a chance to pull the legislation to the right. Progressives will try to tighten it in a few key ways. And the results of those votes will clarify a). how strongly, if at all, Republicans will fight the bill; b). how pleased the White House will be with the final product; and c). how easy it will be to reconcile with the House legislation, which passed last December.

There will be many votes on many amendments, but here are four to keep an eye on:

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Financial Reform

Dodd Unveils Financial Regulation Plan

Ben Frumin | March 15, 2010, 2:48PM

Sen. Chris Dodd (D-CT).

Retiring Sen. Chris Dodd (D-CT) unveiled his go-it-alone financial reform proposal this afternoon, after an attempt at bipartisanship fell apart last week.

The bill is neither as sweeping nor as far-reaching as some reform proponents would like -- but it would still amount to a major overhaul of existing financial regulations. Among other things, the bill would put a consumer protection agency at the Fed and give the central bank new powers of oversight.

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