Bernanke's options to rev up economy are limited
Fed Reserve Chairman Ben Bernanke testifies before Congress today about his plans to revive the economy. But he might not have much new data to share.
Federal Reserve Chairman Ben Bernanke (Chip Somodevilla/Getty Images)
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TEXT OF STORY
Bill Radke: When Federal Reserve Chairman Ben Bernanke testifies to Congress today, lawmakers will want to know how he plans to revive the economy. But Marketplace's Nancy Marshall Genzer reports Bernanke's options are limited.
Nancy Marshall Genzer: Usually, if the Fed wants to tune-up the economy, it pushes interest rates down. Borrowing becomes cheap. But current interest rates are already near zero.
Catherine Mann is a former Fed economist. She says the Fed has other tools. Take the bully pulpit. Mann says Bernanke can use his congressional testimony to highlight banks' reluctance to lend money.
Catherine Mann: And the more that the Federal Reserve shines some light on that behavior, the more the financial system starts to say let's see if we can put ourselves in a better light.
Larry Meyer is a former Fed governor. He agrees that talk is the best Fed tool right now. But he thinks the Fed should talk about when it might nudge interest rates higher.
Larry Meyer: Change the whole conversation. That changes the whole psychology of the markets. That's a big deal.
If talk doesn't work, the Fed does have some more radical tools. It could start buying up corporate bonds that have been bundled into investments. But that tool could backfire if the markets see it as an act of desperation.
In Washington, I'm Nancy Marshall Genzer for Marketplace.
Comments
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07/21/2010
And of course Larry Meyer wants to change the whole psychology of the markets, that way he positions his cronies to extract more $$$ from those who are willing to gamble in desperation to seek profits from our current problems. It is simple and has been the same animal. The bigger and meaner you are, the more you will gobble or outlast your competition. These (the wealthy) DO NOT understand that their wealth depends on us, the millions of Americans that buy their goods ect. If they let us fail, they will fail, (but with plenty of comfort).
07/21/2010
Of course the wealthy want interest rates increased, but that will not work. Anyone can see that very few Americans are buying anything now. Again and again, these problems are traced to the BANKS (or those that have too much cash to play with). It is very simple, it has been this way always in modern industrial economies.
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