Fed to the rescue: Bernanke takes steps to revive the U.S. economy
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Federal Reserve Bank chairman Ben S. Bernanke announced important steps Thursday to shake the economy out of the doldrums and start it on a path toward better health.
Two ominous pieces of data surfaced recently. One is that in August the American economy again registered weak monthly job growth, only 96,000. That's not good enough if the United States is ever going to get over the catastrophic downturn, primarily in the housing market, that started in 2007. Unemployment remains above 8 percent.
The second piece of depressing information is that the economy grew in the second quarter only at a very slow 1.7 percent. It's better not to think about the comparative growth rates of Brazil, China and India, but there is no getting around the fact that the U.S. figure is very weak.
So the Fed acted, even though America is in the midst of the silly season, presidential election time, when any action -- federal, state or local -- can be criticized as angling for political advantage. Yet the Federal Reserve Bank is as close to apolitical as any U.S. government agency. Chairman Bernanke does not come up for reappointment until 2014, long after the Nov. 6 election. His predecessor, Alan S. Greenspan, did sometimes try to please the presidents under whom he served in order to stay in office.
Mr. Bernanke pledged the Fed to buy $40 billion a month in mortgage-backed securities for an indefinite period. He said his goal is to reduce unemployment to 6 percent. The Fed's action is targeted at the housing market, to reduce foreclosures and ease buying and refinancing by lowering mortgage interest rates.
The boost it will give the housing market should stimulate new construction, thus creating jobs. Criticism of the Fed's action will focus on the fact that it will be buying mortgage-backed securities, the instrument that was a big factor in the 2008 financial collapse. It will also be said that the move will help the president's bid for re-election.
In fact, its main effect will be to help Americans -- Democrats, Republicans and independents who need jobs. On that basis it looks like just what the doctor ordered.
First Published September 17, 2012 12:00 am