Bernanke’s Fed: an “academic in a china shop?”

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A few thoughts and links about the Fed’s rate cut today. First of all, what’s happening is nothing short of stunning: the central bank has now slashed interest rates twice in eight days while the Congress argues over how best to thrust $100 billion into the hands of American consumers.

As one of my favorite Wall Street guys, Art Hogan, said recently, the good news is that the government is acting quickly to give the economy a double shot: serious fiscal and monetary stimulus; the bad news is, the economy needs it.

Will the rate-cutting and dollar-mailing help? Of course they will. But the economy, and housing, are still on a downward trajectory.

A commenter passed this along -- economic analysis from the blog of former Labor Secretary Robert Reich: ’Most consumers are at the end of their ropes and can’t buy more. Real incomes are no higher than they were in 2000, while food and energy and health care costs are all rising faster than inflation. And home values are dropping, which means an end to home equity loans and refinancing. ... Add all this together and there’s just not enough consumer demand out there to keep the American economy going.’

I’ve also been wanting to pass along this recent Fed analysis from another favorite, mortgage broker/pundit Lou Barnes. For months Barnes had been on the fence about Bernanke, but last week, after the emergency rate cut, Lou took a stand: Bernanke is in over his head, and not learning very fast: ‘Last Thursday, Mr. Bernanke went to Congress to ask for a stimulus package ‘quickly.’ A Chairman without confidence in his own resources immediately destabilized markets all over the world ... The Fed Chairman never, ever goes to Congress to ask for stimulus: that’s the Administration’s job. ... He has shown political ineptitude from the first months in office (blabbing intentions to a pretty reporter at a party), and does not appear to have learned a thing. ... The consequence of random, academic-in-a-china-shop behavior: an already fragile and illiquid bond market raised rates and slowed trading.’

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Photo Credit: Fed chairman Ben Bernanke by Bloomberg News.