Word: feds
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Dates: during 1990-1999
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BILL CLINTON IS IN A TICKLISH SPOT. He needs the Federal Reserve Board to help ward off the threat of a recession that could gravely wound or even kill his re-election bid. But he dare not put any overt pressure on the fiercely independent Fed, or on its Republican-appointed chairman, Alan Greenspan. And though the President has been pointedly silent about whether he will reappoint Greenspan when his term expires March 1, few people in Washington think he would risk dumping him. There would be too much hell to pay in Congress, on Wall Street...
Greenspan, however, has motives beyond his own job security for at least partly accommodating White House wishes. The Fed chairman would badly tarnish his reputation as a prudent monetary watchdog if he allowed a recession to develop by keeping interest rates too high for too long. And he can now claim victory in the fight against inflation that he had long rated more important than promoting economic growth. Last year was the fourth in a row in which consumer prices rose by less than 3%, a period of stability unmatched in three decades...
...point each. That prompted major banks to lower the prime lending rates granted to their best customers by the same amount, to 8 1/4%. The discreet adjustment, his third since July, also drew an ever so discreet statement from the Administration praising the cut while stressing respect for the Fed's independence...
...upshot: a business expansion that is at some risk of dying of old age (it began in March 1991) needs more stimulus than the Fed is giving it. Or so say many economists. Last week's tweak is "too little, too late," argues Allan Meltzer, professor of political economy at Carnegie-Mellon University. Says Irwin Kellner, chief economist of Chemical Bank: "A quarter point will help a wee bit, but it's going to take more than that to get this economy going." One signpost: house sales lately have been flat, despite a drop in mortgage rates...
...most economists still expect continued growth this year--and they do--that is partly because they think the Fed will cut interest rates some more. They further expect business spending for new plant and equipment and strong export sales to take up slack from consumers. Also, says economist Bernard Weinstein of the University of North Texas, "you don't have a recession in an election year...