- 97% of the people believe that the Fed is here to help the economy, the banks, the people.
- Of the 3% remaining, 2.99% of the people believe that the Fed is evil and able to create inflation at will.
- The remaining 0.01% believe that the Fed is evil, but that it doesn't have all that much power when credit peak has been reached, and more importantly, that the Fed is managed by human beings after all, prone to the same biaises as every one of us.
And the proofs are now emerging. A couple of days ago, this very interesting report was published by the Wall Street Journal about the dissents at the Fed. Mish picked that up: Fed Split on Move to Bolster Sluggish Economy
The Aug. 10 meeting of top Federal Reserve officials was among the most contentious in Ben Bernanke's four-and-a-half year tenure as central bank chairman. With the economic outlook unexpectedly darkening, the issue was a seemingly technical one: whether to alter the way the Fed manages its huge portfolio of securities.Now here's an additional strong message that things might be changing, and that finally, Bernanke might be set some limits:
At least seven of the 17 Fed officials gathered around the massive oval boardroom table, made of Honduran mahogany and granite, spoke against the proposal or expressed reservations. At the end of an extended debate, Mr. Bernanke settled the issue by pushing successfully to proceed with the move.
Officials were clustered in two camps. In one camp, Mr. Dudley, and the presidents of the Boston and San Francisco Fed banks, Eric Rosengren and Janet Yellen, were distressed that the Fed was far from its objectives of low unemployment and stable inflation.
Richard Fisher, president of the Dallas Fed, and others expressed a concern that Fed moves might be ineffective, arguing that businesses weren't using already ample, cheap credit to fund investments because they were uncertain about many other problems, including government deficits and new financial regulations.
Narayana Kocherlakota, president of the Minneapolis Fed, argued that a large part of today's unemployment problem is caused by issues the Fed can't solve, such as the mismatch between the skills of jobless workers and the skills that employers wanted. "The Fed does not have a means to transform construction workers into manufacturing workers," Mr. Kocherlakota said in a speech after the meeting.
The president of the Philadelphia Fed, Charles Plosser, who has had misgivings before about Mr. Bernanke's initiatives, deemed the latest move premature because, though the Fed was lowering 2010 growth estimates, it wasn't significantly ramping down its estimates for growth in 2011 and beyond. Two other frequent dissenters, Thomas Hoenig of Kansas City, and Jeffrey Lacker of Richmond, Va., also objected. Fed governor Betsy Duke, a former commercial banker, also expressed reservations, according to participants.
Aug. 26 (Bloomberg) -- Kansas City Federal Reserve President Thomas Hoenig said he cut back invitations to Fed officials to the Jackson Hole symposium this year to broaden debate and discourage uniform thinking on monetary policy.
“We are trying to avoid the same group so that we get this group think that people can attribute if you only talk to the same people over and over,” Hoenig said in an interview broadcast today on Bloomberg Radio’s “The Hays Advantage,” with Kathleen Hays.This is not only quite a strong message, but also something that would never have been imaginable just a few months ago. As I stated before, the Fed is naked and Bernanke as well. But it seems like Bernanke will soon be tarred and feathered.
The Kansas City Fed this year invited the other 11 Fed banks to send either the president or research director, not both officials like past years. More international central bankers are coming instead, Hoenig said. The Fed official’s call for more policy perspectives reflects his voting record: Hoenig has been the sole dissenter on policy this year, dissenting five times, including most recently on Aug. 10.
“You don’t get good outcomes unless there is a broad diversity of views, discussion, debate,” said Hoenig, who took office in 1991 and is the Fed’s longest-serving policy maker. The debate should be one “where you can have differences respectfully and graciously of each other and hopefully come to better conclusions,” Hoenig said. That is my goal.”
Hoenig dissented this month from the Fed’s decision to keep its bond holdings at $2.05 trillion by reinvesting about $15 billion to $20 billion a month in maturing mortgage-backed securities to support a slowing economic recovery. The Federal Open Market Committee held the main interest rate unchanged at zero to 0.25 percent, where it’s been since December 2008, and affirmed a pledge to keep rates low for “an extended period.”