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The Federal Reserve Turns Left

April 22, 2012

By William Greider, The Nation | Report- excerpt

“…As almost everyone understands, nothing substantial will be accomplished this year…

The central bank declines to participate in the happy talk about recovery or in the righteous sermons attacking the deficit. In its muted manner, the Fed keeps explaining why the house is still on fire, why more aggressive action is needed, and is gently nudging the politicians who decide fiscal policy to step up. But its message is ignored by Congress and the president and viciously attacked by right-wing Republicans who say, Butt out…

As a longstanding critic of the Federal Reserve, I am experiencing a role reversal of my own. In the new circumstances, I find myself feeling sympathy and a measure of admiration for Bernanke’s willingness to stand up for unorthodox ideas and to switch sides on the sensitive matter of debt reduction for failing homeowners…

Housing, of course, is an issue that belongs to the fiscal side of government, but the Fed can help out because its “dual mandate” in law requires monetary policy to support both maximum employment and stable money. If the housing market does not get well, Fed experts reasoned, there will be no recovery…

We hope the author is right. Underwater mortgages have and foreclosed properties have  had a devastating effect on local governments due to falling property taxes. Fixing the housing problem will alleviate a lot more pain in cities that are already losing their ability to provide basic services, and could save many programs that took decades to create, not to mention jobs. Perhaps the state and local attorneys general are also giving Bernanke some impetus for action due to the large number of cases they are filing against the banks.



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