Republican Letter to Bernanke

[TheDave]

Dear Chairman Bernanke,

It is our understanding that the Board Members of the Federal Reserve will meet later this week to consider additional monetary stimulus proposals. We write to express our reservations about any such measures. Respectfully, we 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.

It is not clear that the recent round of quantitative easing undertaken by the Federal Reserve has facilitated economic growth or reduced the unemployment rate. To the contrary, there has been significant concern expressed by Federal Reserve Board Members, academics, business leaders, Members of Congress and the public. Although the goal of quantitative easing was, in part, to stabilize the price level against deflationary fears, the Federal Reserve’s actions have likely led to more fluctuations and uncertainty in our already weak economy.

We have serious concerns that further intervention by the Federal Reserve could exacerbate current problems or further harm the U.S. economy. Such steps may erode the already weakened U.S. dollar or promote more borrowing by overleveraged consumers. To date, we have seen no evidence that further monetary stimulus will create jobs or provide a sustainable path towards economic recovery.

Ultimately, the American economy is driven by the confidence of consumers and investors and the innovations of its workers. The American people have reason to be skeptical of the Federal Reserve vastly increasing its role in the economy if measurable outcomes cannot be demonstrated.

We respectfully request that a copy of this letter be shared with each Member of the Board.

Sincerely,

Sen. Mitch McConnell, Rep. John Boehner, Sen. Jon Kyl, Rep. Eric Cantor

[TheDave]

Fwiw...

This seems to be a relatively historical move by Republicans... So what are people opinions?

[bronclvr]

As badly as I want to see the Economy turn the corner (and I really do), I believe they are right on target-we can't keep just throwing money at the problem, we need a plan, and I haven't heard of one (yet)-maybe Bernanke really does have one (I hope so)-

I've brought this up in the past, and it's a tough question (I know), but as pointed out in this "letter", it is the American Consumer who drives demand-how in hell do you get Consumer's to feel good about their lot in life, to want to go back into debt, spend money, and get us out of this nightmare?

[Rohirrim]

Giving a ****load of money to the banks is obviously the equivalent of flushing it down the toilet. IMO, we should start building and repairing things; Bridges, highways, etc. Directly infuse the money into the economy by putting people to work. I didn't realize this before, but I was up at Red Rocks a little while ago and discovered that it was built by a government program during the Great Depression (http://en.wikipedia.org/wiki/Red_Rocks_Amphitheatre). There's a statue up there dedicated to the CCC. It's an incredible place, if you haven't been there before, go see it. We need to stop investing in China, Iraq and Afghanistan and start investing in America, and specifically, in Americans. Not in banks and Wall Street, who have proven to be nothing more than pirates and thieves.

[bronclvr]

I didn't realize this before, but I was up at Red Rocks a little while ago and discovered that it was built by a government program during the Great Depression (http://en.wikipedia.org/wiki/Red_Rocks_Amphitheatre). It's an incredible place, if you haven't been there before, go see it.

My Grandfather was one of the workers at Red Rocks-I was raised in Golden, and spent a lot of time at Red Rocks (and the stories that go along with that)-have you seen the Hatchet Lady? zowie!

[TheDave]

OK before everyone starts barking at the moon...

Here is what the Fed is considering...http://www.forbes.com/sites/steveschaefer/2011/09/21/what-bernankes-operation-twist-means-for-banks/


The Federal Reserve’s monetary policy committee wraps up a two-day meeting Wednesday afternoon, and most market-watchers are anticipating some form of Operation Twist – a bid to lower short-term interest rates by redirecting the central bank’s balance sheet toward the longer end of the Treasury curve. Such a move – say, selling two-year notes to buy 10-years – would have a mixed impact on the financial sector.

To oversimplify things, banks traditionally make their money borrowing short and lending long, picking up the difference between their own funding costs and the rates they charge consumers and businesses for mortgages and commercial loans. Net interest margins (NIM) rise when the shorter end of the curve has lower interest rates than the long term, so a flattening of the curve is a negative for banks.

[Rohirrim]

OK before everyone starts barking at the moon...

Here is what the Fed is considering...http://www.forbes.com/sites/steveschaefer/2011/09/21/what-bernankes-operation-twist-means-for-banks/

Does it even matter? From what I understand, the banks are just sitting on trillions now. Maybe the Fed is trying to use this as a wedge to force the banks to bust loose with some capital?

[alkemical]

Will this reduce ATM surcharge fees?

[Rohirrim]

Will this reduce ATM surcharge fees?

Exactly! You might be joking, but this is not so much of a joke. These banks are turning into nothing but rentiers. For those who didn't catch it, I recommend this:http://www.orangemane.com/BB/showthread.php?t=99934. Charging fees is a far less riskier option than capitalizing business.

[TheDave]

Does it even matter? From what I understand, the banks are just sitting on trillions now. Maybe the Fed is trying to use this as a wedge to force the banks to bust loose with some capital?

I think this has more to do with long term stability of interest rates which combined with the advantage of securing significant debt to long term historically low rates.

I realize they bring up the short term lending side, but besides signaling that mortgage rates will remain low for an extended period of time I don't see how it changes consumer lending.

Which in a round about way is my point... Unless Bernanke and Co come back with something significantly different than what is currently expected... well... I'm trying to figure out what the republican concern is. Like I said in the beginning this is a somewhat historic move by a group of politicians to influence the Fed during historic economic times.

[Rohirrim]

I think this has more to do with long term stability of interest rates which combined with the advantage of securing significant debt to long term historically low rates.

I realize they bring up the short term lending side, but besides signaling that mortgage rates will remain low for an extended period of time I don't see how it changes consumer lending.

Which in a round about way is my point... Unless Bernanke and Co come back with something significantly different than what is currentely expected... well... I'm trying to figure out what the republican concern is. Like I said in the begining this is a somewhat historic move by a group of politicians to influence the Fed.

Well, the only actions we have seen out of this group of politicians for years has been ideologically driven. They've proven again and again that they have no interest in, or respect for, any American tradition that doesn't match their ideological world view. I'm sure this is just an exploratory probe of Bernanke to see if there are any weaknesses they can exploit. They preach against the value of government while fighting to gain more power for their corporate masters and thereby, replace free government with oligarchs. Same as it ever was.

[alkemical]

Exactly! You might be joking, but this is not so much of a joke. These banks are turning into nothing but rentiers. For those who didn't catch it, I recommend this:http://www.orangemane.com/BB/showthread.php?t=99934. Charging fees is a far less riskier option than capitalizing business.

It was half a joke. ;)

That thread is awesome BTW. Lots of brainfood.

[Rohirrim]

My Grandfather was one of the workers at Red Rocks-I was raised in Golden, and spent a lot of time at Red Rocks (and the stories that go along with that)-have you seen the Hatchet Lady? zowie!

Nobody sees the Hatchet Lady of Red Rocks and lives to tell about it. ;D

[epicSocialism4tw]

Quantitative easing is meant to raise the value of certain bank holdings, but it makes consumer dollars less valuable.

That's why Rick Perry called it 'treasonous' during a recession...because it ultimately hurts everyone but the people trading money.

[TheDave]

Quantitative easing is meant to raise the value of certain bank holdings, but it makes consumer dollars less valuable.



What?

[epicSocialism4tw]

What?

Wiki had a decent explanation if QE:

"A central bank implements quantitative easing by purchasing financial assets from banks and other private sector businesses with new electronically created money.[3][4][5][6] This action increases the excess reserves of the banks, and also raises the prices of the financial assets bought, which lowers their yield.[7]"

http://en.wikipedia.org/wiki/Quantitative_easing

[peacepipe]

http://www.reuters.com/article/2011/09/21/us-usa-fed-idUSTRE78J3HB20110921

[epicSocialism4tw]

A more comprehensive look that is probably hard to read unless youve had a macroeconomics course:

http://www.businessinsider.com/what-is-quantitative-easing-2010-8

[Pony Boy]

Giving a ****load of money to the banks is obviously the equivalent of flushing it down the toilet. IMO, we should start building and repairing things; Bridges, highways, etc. Directly infuse the money into the economy by putting people to work. I didn't realize this before, but I was up at Red Rocks a little while ago and discovered that it was built by a government program during the Great Depression (http://en.wikipedia.org/wiki/Red_Rocks_Amphitheatre). There's a statue up there dedicated to the CCC. It's an incredible place, if you haven't been there before, go see it. We need to stop investing in China, Iraq and Afghanistan and start investing in America, and specifically, in Americans. Not in banks and Wall Street, who have proven to be nothing more than pirates and thieves.

Bridge Comes to San Francisco With a Made-in-China Label

At a sprawling manufacturing complex here, hundreds of Chinese laborers are now completing work on the San Francisco-Oakland Bay Bridge.

Next month, the last four of more than two dozen giant steel modules — each with a roadbed segment about half the size of a football field — will be loaded onto a huge ship and transported 6,500 miles to Oakland. There, they will be assembled to fit into the eastern span of the new Bay Bridge.

American steelworker unions have disparaged the Bay Bridge contract by accusing the state of California of sending good jobs overseas and settling for what they deride as poor-quality Chinese steel. Industry groups in the United States and other countries have raised questions about the safety and quality of Chinese workmanship on such projects.


http://www.nytimes.com/2011/06/26/business/global/26bridge.html?pagewanted=all

[Rohirrim]

Bridge Comes to San Francisco With a Made-in-China Label

At a sprawling manufacturing complex here, hundreds of Chinese laborers are now completing work on the San Francisco-Oakland Bay Bridge.

Next month, the last four of more than two dozen giant steel modules — each with a roadbed segment about half the size of a football field — will be loaded onto a huge ship and transported 6,500 miles to Oakland. There, they will be assembled to fit into the eastern span of the new Bay Bridge.

American steelworker unions have disparaged the Bay Bridge contract by accusing the state of California of sending good jobs overseas and settling for what they deride as poor-quality Chinese steel. Industry groups in the United States and other countries have raised questions about the safety and quality of Chinese workmanship on such projects.


http://www.nytimes.com/2011/06/26/business/global/26bridge.html?pagewanted=all

That's not only despicable. It's stupid. China can underbid everybody else because they use **** for steel. California better prepare itself for massive lawsuits when the next earthquake drops that Chinese crap into the bay.

[TailgateNut]

Bridge Comes to San Francisco With a Made-in-China Label

At a sprawling manufacturing complex here, hundreds of Chinese laborers are now completing work on the San Francisco-Oakland Bay Bridge.

Next month, the last four of more than two dozen giant steel modules — each with a roadbed segment about half the size of a football field — will be loaded onto a huge ship and transported 6,500 miles to Oakland. There, they will be assembled to fit into the eastern span of the new Bay Bridge.

American steelworker unions have disparaged the Bay Bridge contract by accusing the state of California of sending good jobs overseas and settling for what they deride as poor-quality Chinese steel. Industry groups in the United States and other countries have raised questions about the safety and quality of Chinese workmanship on such projects.


http://www.nytimes.com/2011/06/26/business/global/26bridge.html?pagewanted=all


It's called a "Manufactured in the USA" clause which is easily inserted into any project specification. This isn't rocket science.

[TailgateNut]

That's not only despicable. It's stupid. China can underbid everybody else because they use **** for steel. California better prepare itself for massive lawsuits when the next earthquake drops that Chinese crap into the bay.


I could set two Ductile Iron Fittings (DIP) side by side, then ask someone who has never been exposed to that type of material as to which is of superior qulity and which is inferior, and I guarantee they would be able to point out the lack of quality in the Chinese CRAP without having to look at the manufacturers' labeling.

[Pony Boy]

That's not only despicable. It's stupid. China can underbid everybody else because they use **** for steel. California better prepare itself for massive lawsuits when the next earthquake drops that Chinese crap into the bay.

I think despicable is an understatement .

Zhenhua put 3,000 employees to work on the project: steel-cutters, welders, polishers and engineers. The company built the main bridge tower, which was shipped in mid-2009, and a total of 28 bridge decks — the massive triangular steel structures that will serve as the roadway platform.

Pan Zhongwang, a 55-year-old steel polisher, is a typical Zhenhua worker. He arrives at 7 a.m. and leaves at 11 p.m., often working seven days a week. He lives in a company dorm and earns about $12 a day.

“It used to be $9 a day, now it’s $12,” he said Wednesday morning, while polishing one of the decks for the new Bay Bridge. “Everything is getting more expensive. They should raise our pay.”

To ensure the bridge meets safety standards, 250 employees and consultants working for the state of California and American Bridge/Fluor also took up residence in Shanghai.

In New York City alone, Chinese companies have won contracts to help renovate the subway system, refurbish the Alexander Hamilton Bridge over the Harlem River and build a new Metro-North train platform near Yankee Stadium.

[L.A. BRONCOS FAN]

I didn't realize this before, but I was up at Red Rocks a little while ago and discovered that it was built by a government program during the Great Depression (http://en.wikipedia.org/wiki/Red_Rocks_Amphitheatre).

Then that settles it:

No more concerts for tea party moonbats (if they're consistent.)

[L.A. BRONCOS FAN]

Does it even matter? From what I understand, the banks are just sitting on trillions now. Maybe the Fed is trying to use this as a wedge to force the banks to bust loose with some capital?

Thanks to eight years of GOP/BushCo wealth redistribution (read: reverse Robin Hood swindles.)

[TonyR]

As is, we’re looking at a continued economic slump, more unemployment, and more deleveraging via continuing catastrophic consumer default on mortgages, car loans, credit cards, and student aid. And now the GOP leadership is urging that the Federal Reserve make the catastrophe worse? To what end?

I know what the detractors will say: to the end of defeating President Obama and replacing him with a Republican president. And if you’ve convinced yourself that Obama is the Second Coming of Malcolm X, Trotsky, and the all-conquering Caliph Omar all in one, then perhaps capsizing the US economy and plunging your fellow-citizens deeper into misery will seem a price worth paying to rid the country of him.

http://www.frumforum.com/the-gops-bernanke-letter

[Tombstone RJ]

Dear Chairman Bernanke,

It is our understanding that the Board Members of the Federal Reserve will meet later this week to consider additional monetary stimulus proposals. We write to express our reservations about any such measures. Respectfully, we 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.

It is not clear that the recent round of quantitative easing undertaken by the Federal Reserve has facilitated economic growth or reduced the unemployment rate. To the contrary, there has been significant concern expressed by Federal Reserve Board Members, academics, business leaders, Members of Congress and the public. Although the goal of quantitative easing was, in part, to stabilize the price level against deflationary fears, the Federal Reserve’s actions have likely led to more fluctuations and uncertainty in our already weak economy.

We have serious concerns that further intervention by the Federal Reserve could exacerbate current problems or further harm the U.S. economy. Such steps may erode the already weakened U.S. dollar or promote more borrowing by overleveraged consumers. To date, we have seen no evidence that further monetary stimulus will create jobs or provide a sustainable path towards economic recovery.

Ultimately, the American economy is driven by the confidence of consumers and investors and the innovations of its workers. The American people have reason to be skeptical of the Federal Reserve vastly increasing its role in the economy if measurable outcomes cannot be demonstrated.

We respectfully request that a copy of this letter be shared with each Member of the Board.

Sincerely,

Sen. Mitch McConnell, Rep. John Boehner, Sen. Jon Kyl, Rep. Eric Cantor

they are correct

[Tombstone RJ]

As is, we’re looking at a continued economic slump, more unemployment, and more deleveraging via continuing catastrophic consumer default on mortgages, car loans, credit cards, and student aid. And now the GOP leadership is urging that the Federal Reserve make the catastrophe worse? To what end?

I know what the detractors will say: to the end of defeating President Obama and replacing him with a Republican president. And if you’ve convinced yourself that Obama is the Second Coming of Malcolm X, Trotsky, and the all-conquering Caliph Omar all in one, then perhaps capsizing the US economy and plunging your fellow-citizens deeper into misery will seem a price worth paying to rid the country of him.

http://www.frumforum.com/the-gops-bernanke-letter

this is another opinion piece that is more hyperbole than fact.

[That One Guy]

Now, completely thinking out loud, but what if the banks are borrowing from the fed at a low rate, loaning just enough out to cover interest on everything, and then sitting on the rest waiting for interest rates to go back up?

It's how they do it in scrap metal. When prices are down, they buy and hold. When they go up, they make massive profits. Why would this not work for the banks when, unlike metal in my example, they know interest rates HAVE to go back up at some point?

[Bronx33]

My Grandfather was one of the workers at Red Rocks-I was raised in Golden, and spent a lot of time at Red Rocks (and the stories that go along with that)-have you seen the Hatchet Lady? zowie!



Spent just about every weekend up there during HS climbing on the rocks ( which you cant do anymore) there are some sweet caves there.

[Bronx33]

Dear Chairman Bernanke,

It is our understanding that the Board Members of the Federal Reserve will meet later this week to consider additional monetary stimulus proposals. We write to express our reservations about any such measures. Respectfully, we 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.

It is not clear that the recent round of quantitative easing undertaken by the Federal Reserve has facilitated economic growth or reduced the unemployment rate. To the contrary, there has been significant concern expressed by Federal Reserve Board Members, academics, business leaders, Members of Congress and the public. Although the goal of quantitative easing was, in part, to stabilize the price level against deflationary fears, the Federal Reserve’s actions have likely led to more fluctuations and uncertainty in our already weak economy.

We have serious concerns that further intervention by the Federal Reserve could exacerbate current problems or further harm the U.S. economy. Such steps may erode the already weakened U.S. dollar or promote more borrowing by overleveraged consumers. To date, we have seen no evidence that further monetary stimulus will create jobs or provide a sustainable path towards economic recovery.

Ultimately, the American economy is driven by the confidence of consumers and investors and the innovations of its workers. The American people have reason to be skeptical of the Federal Reserve vastly increasing its role in the economy if measurable outcomes cannot be demonstrated.

We respectfully request that a copy of this letter be shared with each Member of the Board.

Sincerely,

Sen. Mitch McConnell, Rep. John Boehner, Sen. Jon Kyl, Rep. Eric Cantor



This really stands out IMO

Respectfully, we 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.

[Arkie]

Pensions were well funded back in 2007, but they've been dwindling ever since. The 100 largest pension plans have assets covering only 79% of their liabilities, down from 86% at the end of 2010. The Fed's "Operation Twist" will cause them more pain. It will likely fall below 60% within two years. Pensions will lose potential income necessary to plan for future obligations. Operation Twist has simply created long-term rates to fall below normal or historic levels.

[That One Guy]

Pensions were well funded back in 2007, but they've been dwindling ever since. The 100 largest pension plans have assets covering only 79% of their liabilities, down from 86% at the end of 2010. The Fed's "Operation Twist" will cause them more pain. It will likely fall below 60% within two years. Pensions will lose potential income necessary to plan for future obligations. Operation Twist has simply created long-term rates to fall below normal or historic levels.

Whatever they do, the fundamental problem has to be addressed and it's currently not.

We have too many workers concentrated in an area that can't really be competitive on the international scale. Anything we try to compete with other countries on, we lose. Protect the markets, punish them for cheap labor, etc... But until we can compete and, ultimately, return some power in the equation to the worker and let him have some say, things will keep heading south. Nothing the fed does can fix that. Not a thing.

EDIT: I said not a thing but nothing short of tanking the economy to compete head on, of course. If they drive us down so bad that we're all forced into poverty then, yes, we can compete.