Tag Archives: Janet Yellen

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Federal Reserve Raises Interest Rate for First Time Since 2008

WASHINGTON, December 17, 2015- For the first time since the bottom of the financial crisis in 2008, the Federal Reserve raised interest rates and has signaled its intent for further increases.

“The Fed’s decision today reflects our confidence in the U.S. economy,” Chair Janet Yellen said at a news conference on Wednesday.

The move was welcomed by Wall Street as the Dow Jones Industrial average ended the Tuesday session with a 224 point gain.

“The Fed reaffirmed that the pace of rate hikes would be slow,” James Marple,TD Economics senior economist wrote in a research note. “The Fed’s expectations for rate hikes next year are set alongside a relatively cautious and entirely achievable economic outlook.”

The hike of the key rate of a quarter-point, placing it between 0.25 and 0.5 percent, ends a seven year period of near-zero borrowing rates. This increase is expected to have mild implications for the mortgage and car loan industries as these notes tend to be tied to 10-year U.S. Treasury yields, which will likely remain low as inflation remains below the Fed’s 2% target.

Rates for other forms of loans such as home equity credit lines and consumer credit cards have already begun to rise with Wells Fargo being the first to announce an increase from 3.25 percent to 3.50 percent shortly after the Fed announcement.

Yellen also stated the hike had a defensive component.

“We’ve worried about the fact that with interest rates at zero, we have less scope to respond to negative shocks,” she told the press.

The ability for the Fed to react to future challenges relies on the central bank’s ability to manipulate interest rates and thus allowing the key rate to rise provides for more long term flexibility.

The policy statement released by the Fed cited “considerable improvement” in the job market as well as confidence that inflation would begin to rise. Included in the statement, Fed officials offered predictions that the rate banks charge on overnight loans, the federal funds rate, would end 2016 just over 1 percent.

The central bank’s action was unanimously approved by a 10-0 vote, a victory for Chairwoman Yellen.

Adjustments on other rates included an increase of 0.25 percent to 0.5 percent on the interest paid by banks to hold funds at the Fed and a decrease in the discount rate it charges banks for emergency borrowing from 1 percent down to 0.75 percent.

The moves by the Fed were not seen favorably by all. Long time critic Sen. Rand Paul (R-Ky.) asked “Should the government be involved with setting prices?” and also stated that “What amazes me about the Federal Reserve setting interest rates is that almost to a person, conservative economists in our country will say, wage and price controls are a mistake.”

Austrian economist Peter Schiff told his radio audience, “When the Fed called off the rate hike last time we got a huge bounce in the stock market. The reason the Fed gave was weak global economic conditions. None of those problems have been solved and it can be argued that global economic conditions are weaker now than in August.”

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Fed Chair Janet Yellen, Ralph Nader Trade Blows Over Interest Rates

In October, five-time independent presidential candidate Ralph Nader wrote an open letter on behalf of Americans with savings and money market accounts to Federal Reserve Chair Janet Yellen criticizing the Fed’s near-zero interest rate policies. Yellen broke from the stoic tradition of Fed chairs in the past and directly responded in a letter to Nader.

In the open letter published by the The Huffington Post, Nader wrote:

[pull_quote_center]We are a group of humble savers in traditional bank savings and money market accounts who are frustrated because, like millions of other Americans over the past six years, we are getting near zero interest. We want to know why the Federal Reserve, funded and heavily run by the banks, is keeping interest rates so low that we receive virtually no income for our hard-earned savings while the Fed lets the big banks borrow money for virtually no interest. It doesn’t seem fair to put the burden of your Federal Reserve’s monetary policies on the backs of those Americans who are the least positioned to demand fair play.[/pull_quote_center]

[RELATED: Ralph Nader Blasts Huffington Post’s “Censorship” of Trump Political News]

He added, “We hear the Federal Reserve’s Board of Governors and the various regional board presidents regularly present their views of the proper inflation and unemployment rate, and on stock market expectations that influence their calculations for keeping interest rates near-zero. But we never hear any mention of us – the savers of trillions of dollars who have been forced to make do with having the banks and mutual funds essentially provide a lock-box for our money while they use it to make a profit for their firms and, in the case of the giant banks and large mutual funds, pay their executives exorbitant salaries… We are tired of this melodrama that exploits so many people who used to rely on interest income to pay some of their essential bills. Think about the elderly among us who need to supplement their social security checks every month.

On Nov. 23, Yellen responded to Nader with a letter of her own, in which she blamed the “hardship” suffered by savers and “particularly seniors on fixed incomes” on what she described as a “continuing aftermath” of the 2007-2008 financial crisis and the “severe recession that followed.

It may help to review a few basic facts,” Yellen lectured. “These lower borrowing costs for millions of American families and businesses helped support asset prices—including home prices and, as you note, stock prices. More importantly, by making consumer purchases more affordable and encouraging businesses to invest, low interest rates supported the economic recovery and the creation of millions of jobs.

Would savers have been better off if the Federal Reserve had not acted as forcefully as it did and had maintained a higher level of short-term interest rates, including rates paid to savers? I don’t believe so. Unemployment would have risen to even higher levels, home prices would have collapsed further, even more businesses and individuals would have faced bankruptcy and foreclosure, and the stock market would not have recovered,” she wrote.

[RELATED: Trump: Fed Chair Yellen Not Raising Rates ‘Because Obama Told Her Not To’]

Nader’s open letter controversially suggested that Yellen consult her Nobel Prize winning economist husband George Akerlof on interest rate policy, a move that many observers interpreted as a sexist gaffe.

Slate’s Jordan Weissmann, who described Nader’s comments as “gross mansplaining,wrote, “So, why is Yellen taking time to respond to a man who hasn’t been politically relevant for 15 years? This is purely speculation, but I don’t really think Janet Yellen cares all that much about Ralph Nader. But the man’s criticisms of the Fed just happen to closely mirror arguments made by some conservatives, who have made bashing the central bank a major economic theme of the GOP primary. So Nader’s letter gives her an excuse to very pointedly respond in writing to their accusations without looking too overtly political. Or maybe the woman just really took umbrage at that husband line.

Federal Reserve Oversight Bill Passes House, Obama Veto Threat Looms

The Republican-led U.S. House of Representatives passed the Fed Oversight Reform and Modernization Act (FORM) on Thursday.

The bill would require the Federal Reserve to establish and publicize a mathematical rule by which it adjusts monetary policy, limit the private bank’s emergency lending powers, and expand the Government Accountability Office’s authority to audit the Fed’s monetary policy decision-making.

According to Zero Hedge, the proposal passed by a vote of 241-185.

[RELATED: World Bank Warns Developing Nations On Federal Reserve Interest Rates]

Republican Speaker of the House Paul Ryan said in a statement lauding the bill’s passage, “If the Federal Reserve explained to the public how it made its decisions, the American people would have greater confidence in them. Families could better plan for the future, invest their money wisely, and create opportunity for all of us. I thank Chairman Hensarling and the Financial Services Committee for offering this commonsense legislation.

A Tuesday letter from Federal Reserve Chair Janet Yellen to House Speaker Paul Ryan and House Democratic majority leader Nancy Pelosi read, “The bill would severely impair the Federal Reserve’s ability to carry out its congressional mandate and would be a grave mistake, detrimental to the economy and the American people.

There is no consensus among economists or policymakers about a simple policy rule that is best suited to cover a wide range of scenarios,” she added.

[RELATED: Texas to Repatriate $1 Billion in Gold from Federal Reserve to New State Depository]

A statement by FORM supporter and House Financial Services Committee Chairman Jeb Hensarling read, “Since the financial crisis, the Fed’s historically unconventional monetary policy and vastly expanded powers granted by Dodd-Frank would make the Fed unrecognizable to members of Congress who created it 100 years ago… While the Fed’s unusual monetary activities and power have increased, there has regrettably been no corresponding increase in its transparency and accountability. The FORM Act will correct that.

The White House has reportedly threatened to veto the bill. “If the President were presented with (the legislation), his senior advisors would recommend that he veto the bill,” read an Obama administration statement.

Trump: Fed Chair Yellen Not Raising Rates ‘Because Obama Told Her Not To’

At a press conference at Trump Tower in New York City on Tuesday, 2016 Republican presidential candidate Donald Trump said interest rates should be raised and accused Federal Reserve Chair Janet Yellen of politicizing monetary policy.

When a reporter asked Trump whether he believes that the Federal Reserve should raise interest rates from long-held record-low levels, Trump replied:

[pull_quote_center]The question is should the Fed raise rates? They are not raising them because Obama has asked them not to raise them. In my opinion, he wants to get out of office, because we are in a bubble and when those rates are raised, a lot of bad things are going to happen or potentially going to happen. And in my opinion Janet Yellen is highly political and she’s not raising rates for a very specific reason: because Obama told her not to because he wants to be out playing golf in a year from now and he wants to be doing other things and he doesn’t want to see a big bubble burst during his administration.[/pull_quote_center]

[RELATED: Donald Trump Denies Calling Afghanistan Invasion a Mistake]

He added, “Janet Yellen should have raised the rates. She’s not doing it because the Obama administration and the president doesn’t want her to. And if she does it, you see what happens every time there’s even a thought of raising them just a little bit…

Reuters reported that Trump then lamented what he described as the U.S. dollar’s lack of competitiveness and said, “If you look at the (currency) devaluations of China, of Japan, of many, many different countries, they’re making it impossible for our companies to compete with them because we don’t have leaders that know how to say to China, ‘Don’t do that. Don’t do that, because if you do that, we’re going to put a big fat tax on you.’

White House press secretary Josh Earnest brushed off Trump’s comments in a Tuesday press conference and said that the Obama administration “goes to great lengths” to enable the Fed to set monetary policies that benefit the U.S. economy.

For more election coverage, click here.

Citing Weak Economy, Feds Delay Interest Rate Hike

WASHINGTON, September 17, 2015– Denoting a weak economy, the United States Federal Reserve, a private bank that controls the country’s monetary policy, decided to hold off on hiking interest rates. Federal Reserve Chairman Janet Yellen made the announcement at a press conference following the Federal Open Market Committee meeting on Thursday. The announcement sent the stock market soaring.

In January, President Obama told Americans during his State of the Union address that the economic crisis was over. “Tonight, we turn the page,” Obama said. “The shadow of crisis has passed, and the State of the Union is strong.” However, Yellen’s refusal to hike rates tells another story of the state of the American and global economies.

According to policymakers, the economy is expected to grow, but forecasts for gross domestic product growth have been downgraded for the next two years. When coupled with China’s sinking economy, dovish Fed members discouraged a rate-hike.

Currently, rates are at rock-bottom levels, and haven’t been hiked in almost a decade. A hike would cause short-term pain in the economy, which is why the feds have continuously pushed against raising rates. The weak economy simply cannot handle the hike without taking a hit.

Regardless, the Fed is still considering a hike. They will take up the issue again during their policy meetings in October and December.

Jeffrey Lacker, president of the Federal Reserve Bank of Richmond, was the only Fed official to vote in favor of raising rates.

Low interest rates are good for investors, as it means money is cheaper to borrow. However, low rates create morale hazard in the markets, which leads to uncontrolled risk. The same low rates created the moral hazard that first sank the economy before President Obama was elected. Low rates are also bad for those with retirement funds and savings accounts because their return is often based off of the fed’s rate.

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Sen. Rand Paul Re-Introduces Federal Reserve Audit Bill

Senator Rand Paul (R-KY) has re-introduced his “Audit The Fed” bill, titled the Federal Reserve Transparency Act of 2015. A press release from Paul states:

Known widely as “Audit the Fed,” the bill calls to eliminate restrictions on Government Accountability Office (GAO) audits of the Federal Reserve and mandate that the Federal Reserve’s credit facilities, securities purchases, and quantitative easing activities would be subject to Congressional oversight.

“A complete and thorough audit of the Fed will finally allow the American people to know exactly how their money is being spent by Washington,” Paul said in his statement. “The Fed’s currently operates under a cloak of secrecy and it has gone on for too long. The American people have a right to know what the Federal Reserve is doing with our nation’s money supply. The time to act is now.”

The bill has 30 co-sponsors, including Sen. Ted Cruz (R-TX), Sen. Marco Rubio (R-FL) and new Senate Majority Leader Mitch McConnell (R-KY).

With Republicans now in control of both the House and the Senate, Paul’s bill has been reported to have a greater likelihood of gaining approval, although it is unlikely that President Obama would sign it. Last month, Federal Reserve Chairwoman Janet Yellen said she would “forcefully” challenge efforts to pass Audit the Fed legislation.

“It’s important to make sure that we can make the decisions we think are best free of short-run political interference with respect to monetary policy,” Yellen said on December 17th of last year. “History shows not only in the United States, but around the world, that central bank independence promotes better economic performance.”

The Federal Reserve Transparency Act of 2015 can be read here.


Majority Leader McConnell’s Aides Say Senate Will Vote on Ron Paul’s Audit the Fed Bill

Former Congressman Ron Paul’s entire political career was dedicated broadly to promoting freedom and liberty. However, during that time, he also successfully brought the subject of monetary policy to the forefront of American political discourse, exposing the shadowy, private Federal Reserve’s built-in conflicts of interest and urging lawmakers to first audit it and then cancel the bank’s charter. The private bank, which has the power to manipulate the value of the US dollar, has been accused of giving sweetheart deals to insiders, such as the time it allegedly gave a $220 million bailout to the wives of two Morgan Stanley executives. Its original mandate was to keep the US currency supply stable, though the dollar’s value has plunged to a fraction of what it was worth when the Fed took over in 1913 and has swung wildly throughout the past decade, generating record profits for connected Wall Street insiders while families struggle to afford the rising prices of life’s necessities.

Ron Paul launched a legislative push to audit the Federal Reserve in 2009, taking advantage of the rising popularity he began to experience following his 2008 presidential bid. The bill he introduced, formally called the Federal Reserve Transparency Act but colloquially referred to by the title “Audit the Fed,” passed the House twice, but was blocked by Democratic Senate Majority Leader Harry Reid, who refused to let the Senate vote on the proposed legislation. Ron Paul’s bill would allow the Government Accountability Office to review the Federal Reserve’s books and retroactively analyze the decisions it makes pertaining to monetary policy. Due to a grassroots push inspired by Ron Paul, a partial-but-incomplete Fed audit was included in the 2010 Dodd–Frank Wall Street Reform and Consumer Protection Act, which exposed the fact that Federal Reserve insiders were given conflict of interest waivers that allowed them to invest in companies that they knew were receiving emergency bailouts.

Now, Republicans have taken control of the Senate, and Senator Mitch McConnell, an Audit the Fed co-sponsor who happens to be a close associate of Ron Paul’s son Senator Rand Paul, has been tapped as majority leader. Stephan Dinan at The Washington Times is reporting that aides at Mitch McConnell’s office are saying that he plans to finally bring the legislation to the Senate floor for a vote now that he has the power to do so. Politico notes that Republican Congressman Thomas Massie of Kentucky intends to re-introduce the bill in the House at the beginning of the 2015 session. Kentucky GOP Senator Rand Paul says he will launch the companion bill in the Senate in January. McConnell has not yet indicated when the bill might face a vote in the Senate.

Though the House is likely to pass Audit the Fed again, the Senate will be a tougher fight, as banking interests, known for funding the high-dollar campaigns of senators needing to win massive, state-wide races, oppose the legislation. In a press conference cited by The Washington Times, Federal Reserve Chair Janet Yellen said two weeks ago, “Back in 1978 Congress explicitly passed legislation to ensure that there would be no GAO audits of monetary policy decision-making, namely policy audits. I certainly hope that will continue, and I will try to forcefully make the case for why that’s important.” Opponents of the Fed audit claim that it constitutes Congress meddling in affairs too arcane for it to understand and warn that politicization of monetary policy will have unintended consequences.

Norm Singleton with Ron Paul’s Campaign for Liberty said, “The change in Senate leadership does present us with the best opportunity yet to get a stand-alone vote on ‘Audit the Fed’… This is popular with 75 percent of the American people, but it’s not popular among Wall Street; it’s not popular among banks; it’s not popular among foreign central banks… it’s better odds now than we’ve had before, but it’s not a slam dunk.”

A Senate vote on Audit the Fed will likely pit Ron and Rand Paul’s network of grassroots activists against wealthy banking insiders in a historic battle over the nation’s dollar, with both forces urging senators to pick sides. Senator Rand Paul’s presidential aspirations may also play into the debate, as he can use the platform of his presidential bid to apply additional pressure to promote the Fed audit.

Federal Reserve Chair’s Neighbors Angered by Her Security Encampment

Ever since Janet Yellen took over as Chair of the Federal Reserve, life has changed for the other well-to-do residents of her Georgetown-area, Washington DC gated community. The Wall Street Journal notes that an armed encampment has formed outside of one of her neighbor’s houses in the Hillandale community, and the federal government is paying thousands per month to rent an adjacent town home, which had at one point been equipped with a massive, brightly-lit camera on the roof, peering down on disgruntled neighbors. 7,000 pound security trucks noisily plow through the neighborhood to pick her up each morning, spilling fluids on the street in violation of Hillandale’s rules.

Upset neighbors have penned a lengthy list of complaints about the uniformed, taxpayer-funded security detail. Vans full of armed police speed through Hillandale in violation of its 15 mile-per-hour speed limit, intimidating residents. Officers behave in an unprofessional manner, loudly socializing, smoking cigarettes, and scarfing down fast food. Also, the extreme visibility of the police presence offends other homeowners, who chose the neighborhood for its strict, privately-enforced rules aimed at keeping the community quiet and aesthetically pleasing. FBI Director Bob Mueller lives in the neighborhood as well, and his security detail stands in stark contrast to the one protecting Yellen. A neighbor who chose to remain anonymous out of fear of federal retaliation told The Wall Street Journal, “Bob Mueller, who you would think would have a much more dangerous job dealing with terrorists all over the world, had people who were businesslike, didn’t socialize and waited for him outside the gate. Now we have this group, overweight, wearing the most ridiculous blue uniforms with the most ridiculous blue caps, and they have guns that are visible.”

Some residents in the area are pushing for new rules to be adopted by the gated community to prevent security outfits from renting property in the neighborhood. The Hillandale Board and Covenant Committee maintains strict rules and enforces them on the other homeowners in the area in the interest of protecting property values, as homes in Hillandale sometimes sell for millions of dollars. The president of the Hillandale board, a real estate agent, has been accused of having self-interested motives and throwing neighbors under the bus by renting a town home to the Federal Reserve.

The heightened police presence doesn’t comfort everyone living in Hillandale. Said another resident, “Some neighbors say it’s great, all the security that is in the neighborhood. But these characters are only here for Janet Yellen. They’re not going to be distracted by robbers, rapists or any other thing. Besides, these guys couldn’t catch a thief if their lives depended on it.”

A number of residents are calling for the Federal Reserve, the FBI, or an independent, third-party consultant to conduct an investigation into the security detail to see if it can be done in a more cost-effective, professional, and less intrusive manner. It is worth noting that the Federal Reserve, a private bank, was given this armed police force as a part of the USA PATRIOT Act. Under Title III, Subtitle B, Section 364 of the law, the Federal Reserve was granted armed officers to protect the bank’s property and top officials.

Senator Ted Cruz: “Audit The Fed”

Screenshot of Senator Cruz’s Facebook Page

Senator Rand Paul (R-KY) has been leading the charge in the US Senate to garner support for a full audit of the Federal Reserve. In fact, Paul has threatened to filibuster the Senate confirmation of Federal Reserve Chairman nominee Janet Yellen unless he gets a vote on his bill to audit the Federal Reserve.

Yellen says no way to a Federal Reserve audit.

Paul and Senator Ted Cruz (R-TX) have latched arms on many occasion, and the two are now teaming up for a strong push to audit the Federal Reserve. Cruz took to his Senate Facebook page to make the announcement. Typical of the new blood in the US Senate, he used a hashtag. #AuditTheFed, Cruz wrote while announcing his teaming up with Paul.

According to the Houston Chronicle, Cruz is on board. “I agree with Rand Paul,” wrote Cruz in a statement Wednesday. “We need to bring transparency to the Fed, so the American people can understand the scope and consequences of its policies.”

The legislation would not only allow for a full audit of the Federal Reserve, but also fully eliminate the current restrictions on auditing the private bank. The Federal Reserve Transparency Act of 2013 currently has 27 co-sponsors in the US Senate. These sponsors include Senate Minority Leader Mitch McConnell (R-KY) & Senator Marc Begich (D-Alaska).

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