Here’s a disturbing story from the Associated Press:
WASHINGTON (AP) — Republican leaders of the House and Senate are urging Federal Reserve policymakers against taking further steps to lower interest rates.
On the eve of the Fed’s two-day policy meeting, the leaders sent a letter to Fed Chairman Ben Bernanke warning that the Fed’s policies could harm an already-weak U.S. economy.
The letter, sent Monday, was signed by Senate Republican Leader Mitch McConnell of Kentucky, Senate Republican Whip Jon Kyl of Arizona, House Speaker John Boehner of Ohio, and House Majority Leader Eric Cantor of Virginia.
The letter followed criticism from several Republican presidential candidates that the Fed efforts to boost growth are raising the risk of inflation.
“The American people have reason to be skeptical of the Federal Reserve vastly increasing its role in the economy,” the lawmakers wrote.
It is rare for lawmakers to try and sway policy action at the Fed, which operates independently of Congress and the White House. It was also sent at a time when Bernanke, a Republican, has faced growing criticism from members of his own party.
Former Fed official Joseph Gagnon, senior fellow at the Peterson Institute for International Economics, called the letter “outrageous. It’s incredible.” He said it’s been several decades since such high-level politicians tried so directly to influence the Fed.
“The fact that it’s in print and signed by the leaders of the House and minority leaders of the Senate raises it up a notch,” Gagnon said.
David Jones, head of consulting firm DMJ Advisors and the author of four books on the Federal Reserve, said he cannot remember another time when members of Congress had made such a direct approach to the Fed in the week that the central bank was meeting.
I think Congressmen have the right to speak out on monetary policy. As long as their advice is not politically motivated. Ask yourself the following question: Would these men be pressuring the Fed to adopt a tighter monetary policy if:
1. Unemployment were over 9%.
2. Inflation had averaged 1% over the past three years.
3. George Bush were president.
Were these men criticizing monetary policy under Bush, when inflation was higher than today? I don’t recall that happening.
Unlike Rick Perry, I don’t think it is treasonous to advocate easy money or tight money. Treason is advocating policies that you know will hurt the country, because you hope you can derive political gain from America’s misfortune. I’ll leave it to my readers to decide who should be charged with treason.
PS. This was especially ironic:
The letter expressed serious concerns that the Fed’s actions could weaken the foreign exchange value of the dollar or encourage excess borrowing by consumers who are already carrying too much debt.
Does anyone recall what happened to the dollar under Bush?
PPS: I used to frequently bash the NYT, but even they are waking up. Check out this excellent story by Joe Nocera.