Congressional Republicans wanted Fed Chairman Ben Bernanke to sit on his hands and let the economy deteriorate. Republican presidential frontrunner Rick Perry recently argued “we would treat him pretty ugly down in Texas,” and suggested Fed efforts to improve the economy could be described as “treasonous.”
It looks like Bernanke doesn’t much care what conservative Republicans think. I’m not sure if today’s actions meet the standard for “treason” under Perry, but the Fed chairman has nevertheless unveiled a new round of efforts.
The Federal Reserve announced a new plan Wednesday to stimulate growth by purchasing $400 billion in long-term Treasury securities with proceeds from the sale of short-term government debt, defying Republican demands to refrain from new actions.
In extending its campaign of novel efforts to shake the economy from its torpor, the Fed said that it was responding to evidence that there was a clear need for help.
“Growth remains slow. Recent indicators point to continuing weakness in overall labor market conditions and the unemployment rate remains elevated,” the Fed said in a statement that listed its reasons for worry about the anemic condition of the American economy. “Household spending has been increasing at only a modest pace in recent months.”
The central bank said in a statement that the program was aimed at reducing the cost of borrowing for businesses and consumers, including the cost of mortgage loans. It hopes that the lower rates will encourage companies to build new factories and hire more workers, and consumers to start spending again on homes and cars and clothes and vacations.
All told, over the next nine months, the Fed intends to sell $400 billion in Treasury securities, shifting from shorter-term to longer-term holdings, with the intention of lowering yields and reducing rates on mortgages and other loans. It’s been labeled “Operation Twist,” and comes nearly a year after the “QE2” policy.