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Jon Talton

Analysis and commentary on economic news, trends and issues, with an emphasis on Seattle and the Northwest.

Category: Federal Reserve
July 18, 2014 at 10:35 AM

Vote: The Fed’s independence

Huffington Post had this headline today: “Congress Fawned Over Ben Bernanke, But It Mansplains To Janet Yellen.” This officially marks the oversaturation of the word “mansplain.” It is also dead wrong, selective quotes notwithstanding. Bernanke faced withering criticism from Congress, which is a big reason why he is not serving another term. Alan Greenspan, acolyte…

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February 27, 2014 at 10:20 AM

What’s on Janet Yellen’s mind

Here are five key points from Federal Reserve Chair Janet Yellen’s testimony before the Senate Banking Committee today: 1. The economy has softened. Up until now, Fed officials have been highly optimistic about the recovery picking up momentum this year. Now, faced with reports of weakness in retail sales, housing and industrial production, Yellen is hedging. Compared…

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October 30, 2013 at 11:33 AM

Staying the course: Your Fed cheat sheet

The Federal Reserve’s policy setting Open Market Committee just concluded its two-day meeting. Existing policy will continue. But reading between the lines is instructive. Here are the key sentences from its statement:

“Indicators of labor market conditions have shown some further improvement, but the unemployment rate remains elevated.” Translation: It will be years before we recover the jobs and job growth lost from the recession. We’re doing all we can. Smile.

“Available data suggest that household spending and business fixed investment advanced, while the recovery in the housing sector slowed somewhat in recent months.” Translation: Not all these critters carry equal weight. Household spending is partly being sustained by a continued unhealthy rise in consumer credit. Fixed investment isn’t causing much hiring when we compare this stage of the recovery to others. And housing has become so vital that slowing is a big deal.

“Fiscal policy is restraining economic growth.” The obsession with both the administration and Congress with austerity is one of the biggest factors holding back job creation. Worse, the tea-party shutdown and game of default chicken proved both costly and dangerous.

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October 9, 2013 at 1:52 PM

The five biggest challenges facing Yellen

President Obama intends to nominate Janet Yellen as the next chairman of the Federal Reserve. Yellen, an economist and professor emerita at the University of California at Berkeley, is now the vice chairman of the Fed’s board of governors and will become the most important central banker in the world. She said all the right things today in a prepared statement, including:

While we have made progress, we have farther to go. The mandate of the Federal Reserve is to serve all the American people, and too many Americans still can’t find a job and worry how they will pay their bills and provide for their families. The Federal Reserve can help, if it does its job effectively. We can help ensure that everyone has the opportunity to work hard and build a better life. We can ensure that inflation remains in check and doesn’t undermine the benefits of a growing economy. We can and must safeguard the financial system.

Here are the most pressing issues she will face if confirmed by the Senate, when she takes office in 2014:

1. Politics. The Federal Reserve was established as a central bank that would be largely insulated from political pressure and for most of its history that’s the way it operated. To be sure, the Fed in the 1970s allowed inflation to get out of control because of subtle pressure from the White House and Congress to emphasize job creation. Now the pressure is out in the open. Members of Congress on the right and the left have criticized the Fed and demanded more accountability, including an audit. Yellen will have to defend the Fed’s independence.

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September 13, 2013 at 10:27 AM

Vote: Is the financial system fixed?

Five years ago this weekend, the giant investment bank Lehman Brothers collapsed, ushering in a financial crisis and economic contraction the likes of which hadn’t been seen since the Great Depression. Less than two weeks later, but before regulators decided to back every big financial institution, Seattle’s Washington Mutual was allowed to become the biggest bank failure in American history. Some would say it was pushed, but that’s another story.

Most of the causes of the catastrophe are well-known: Deregulation, “innovations” such as exotic derivatives, shadow banking, securitization of massive numbers of subprime loans, high executive compensation rewarding excessive risk-taking, too much leverage, regulators captured by the industry and a massive bubble enabled by the Federal Reserve. The costs went well beyond those to the financial system. A Federal Reserve Bank of Dallas report estimates that the Panic of 2008 and resulting downturn cost each household between $50,000 and $120,000. Unemployment remains high. Inequality is worse. Beyond the money, trust in institutions and the equal application of the rule of law has been shredded.

In its typical inviting way, Ezra Klein’s Wonkblog offers 13 charts showing what’s fixed and what isn’t five years later. On the Atlantic’s site, James Kwak argues that policymakers have learned little if nothing from the crash. So it’s time for your say:

Read on for some of the best business and economic stories of the week and the haiku…

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