Where’s Occupy When You Need Them? (Corruption)
By: Jonathan Spicer
ISELIN, New Jersey —
Two top Federal Reserve officials on Friday pushed the case for more stimulus
from the U.S. central bank to help the economic recovery, each zeroing in on
the country’s weak housing market.
Policymakers need to consider more action to kick-start the
housing sector and help the country’s “frustratingly slow” economic
recovery and “unacceptably high” unemployment, William Dudley,
president of the New York Federal Reserve Bank, said in a speech in New Jersey.
Monetary policy should work to complement actions by other
U.S. government policymakers, which together could help to stabilize home
prices and turn around the housing market within a year or two under good
conditions, said Dudley.
Speaking in Hartford, Connecticut, the president of the
Boston Fed, Eric Rosengren, said one way to shore up housing would be for the
central bank to buy more mortgage-backed securities.
“Given the low inflation rate and weak labor markets
that are both likely to persist this year, I believe the Federal Reserve should
continue to explore ways to promote more rapid recovery through stronger
growth,” Rosengren told a business group.
The speeches from Dudley and Rosengren, both of whom are
considered part of the Fed’s “dovish” wing — more concerned with
strengthening the economy than trying to contain inflation — made similar
arguments and could set the tone for the central bank’s more activist wing this
year. Dudley, as the president of the New York Fed, holds a permanent vote on the
central bank’s policy-setting committee; Rosengren will rotate into a voting
seat in 2013.
The Fed has bought Treasury debt and, to a lesser extent,
mortgage-backed securities as part of its so-called quantitative easing efforts
over the last three years, totaling $2.3 trillion in purchases. In response to
the worst recession in decades, the Fed late in 2008 also slashed interest
rates to near zero. .
The purchase of mortgage securities, however, was a
controversial part of the first round of easing in 2009, known as QE1, drawing
criticism from some officials for propping up a specific sector of the economy.
Dudley has in the past suggested the Fed could potentially
do more to drive down mortgage rates to support the housing sector, which was
at the heart of the financial crisis and recession and has continued to hamper
“I believe it is also appropriate to continue to
evaluate whether we could provide additional (policy) accommodation in a manner
that produces more benefits than costs, regardless of whether action in housing
is undertaken or not,” Dudley told the New Jersey Bankers Association
“Monetary policy and housing policy are much more
complements than substitutes.”
The Fed is to hold its next policy-setting meeting January
24-25, when a new slate of four regional Fed bank presidents will rotate into
voting seats. Any further action could hinge tightly to prospects for the
United States’ stubbornly high unemployment.
The Labor Department on Friday reported that nonfarm
payrolls added 200,000 jobs in December, the biggest gain in three month, and
the jobless rate dropped to a near three-year low of 8.5 percent, offering the
strongest evidence yet of an acceleration in economic activity.
Asked about the news, Rosengren said that while the job
growth is better than had been seen recently, it is still not enough to return
the country to full employment.
The moribund housing market and the European debt crisis,
which is dragging on the European economy, continue to pose a threat to the
The Fed waded into the debate over what to do with the two
main government-run mortgage finance firms this week, arguing in a paper sent
to Congress that Fannie Mae and Freddie Mac could play a bigger role in turning
around the housing market if they were allowed to provide cheaper mortgages to
a broader pool of homeowners.
On Friday, Dudley called the white paper “a thoughtful
analysis of housing policy.”
A “truly comprehensive approach,” he added,
“would also include long-term reform — including reform of Fannie Mae and
Freddie Mac — to put housing finance on a more stable footing and to equip the
market to deal more effectively with any future systemic shocks.”