Did The Republican Letter To Bernanke Seal The Deal For Even MORE QE? JP Morgan's Take

Tyler Durden's picture

As we reported, last night a quartet of GOPers (re)sent a letter to Bernanke demanding no more QE. To be sure this was not the first such letter, and followed a nearly identical missive sent back in November of 2010. And while the ultimate purpose of this letter is unclear, and is unlikely to prevent the Fed from doing the only thing it believes it should do: i.e., spark the economy by reflating asset values, aka printing or duration extending - or the only things it knows how to do, did the republicans just shoot themelves in the foot and allign the dissenters against growing opposition to a full blown LSAP episode? Here is JP Morgan's Michael Feroli explaining why this may be the case.

Just when you thought economic policy-making in the US couldn't get any worse, last night elected Congressional leaders chose to pressure the central bank during an ongoing monetary policy meeting. Economists disagree on many things but one proposition that has near-universal assent is that sound monetary policy should be conducted free of political interference. What does the Congressional pressure mean for the outcome of today's meeting? One view is that since the letter to Bernanke warned against further monetary stimulus, the FOMC will be less likely to provide monetary stimulus -- through either Operation Twist or other means. It is also possible, however, to reach the opposite conclusion: at the margin the Committee may be more likely to provide stimulus in order to assert their independence and demonstrate that they will not be politically intimidated. Our view is that this Congressional letter will have no impact on the Committee's decision: the Chairman has no illusions about winning any Capitol Hill popularity contest and is more likely leading with an eye to how economic historians judge him many years from now.


Another question is how the political pressure will affect potential dissenters. In the absence of this letter we would expect up to three hawkish dissents once again -- provided the Fed takes some action -- and possibly one dovish dissent from Evans. However, the letter from the Congressional leaders cited in support of its view "significant concern expressed by Federal Reserve Board Members," among others. (Presumably the letter meant FOMC members, as Federal Reserve Board members have been generally supportive of Bernanke's policy). There is a chance that Committee members who have some reservations about Fed policy may now be less likely to dissent, to avoid validating the views expressed in the Congressional letter, as surely all on the FOMC -- hawk or dove -- would find this political meddling repugnant. It's probably still the case that we get another handful of hawkish dissents, though there is now a chance the Committee circles the wagons in response to the political pressure and we get fewer than three dissents.

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GeneMarchbanks's picture

OOO! OOO! I'll try.. ... ... ... yeah...

MillionDollarBonus_'s picture

Federal Reserve officials need to make it clear that they will NOT be bullied by this completely inappropriate grandstanding by these republican congressmen. I can't understand why the American public is not OUTRAGED by this political meddling!

TruthInSunshine's picture

As usual, you are correct.

It's about time that Ben S. Bernanke stops allowing the meanies to bully him around, and that he shows them what a boss he is.

The Bernank has the best interests of savers, retirees, students & the jobless/underemployed at heart, and he'll do anything he can to ensure that their opportunities only increase, and that they're purchasing power and employment options only expand, no matter what the banks try and do to crimp these egalitarian aspirations.

MillionDollarBonus_'s picture

At least we can agree on the most basic of premises, such as the idea that the Federal Reserve should be able to simply pursue their dual mandate independently of political ramblings. There is no place for politics in setting monetary policy. The Federal Reserve was specifically set up to be INDEPENDENT.

Dr Hackenbush's picture

Youre correct sir, JPM is the Federal Reserve, and they are independent 

LowProfile's picture


I voted MM$bonus up for his hilarious sarcasm.

SimplePrinciple's picture

If you think those 14-year terms for the Governors keeps them independent, then you overlook that virtually none of them serve out their whole terms.  There are just too many rewards awaiting them when they leave.

Beam Me Up Scotty's picture

Independent to serve their own best interests more like it. You really think they care about J6P and all the rest of the peons?

whstlblwr's picture

How dare the Congress question the Federal Reserve. Do they know who they talk to, the most brilliant economic minds of our day. They should keep politics out of it so the Federal Reserve can do what the banks set it up to do. Bring the banks more money and to take taxpayer money to support any failed bank. How else can the Federal Reserve be expected to turn profit for the banks. Congress who do you represent? The people or the banks?

Edit: I forgot, according to Supreme Court and Mitt Romney, corporations, self-serving money motive, are people too.

Ned Zeppelin's picture

Independent of whom or what is the question. If you mean independence from accountability and the normal and appropriate controls of a republican form of government whose authority rests on the consent of the governed, that is true enough.

Elmer Fudd's picture

Oh yeah, we need a FED and central banks to set monetary policy for the rest of us dumbasses.

Gold Man-Sacks's picture

Dual mandate?  More like double penetration. 

Gold Man-Sacks's picture

ZH keeps double posting my posts.  Hmmm, that sounds kind of kinky.

Beam Me Up Scotty's picture

Well, you were just talking about double penetration.  Too many Peter North movies on your shelf?

NeoCapitalist's picture

Lol priceless... I am still in the camp that MillionDollar is not kidding.. he is just that dumb...

Axenolith's picture

IDK dude, being that dumb would almost preclude possessing even a brain stem, which would mean he couldn't even conduct the minute by minute act of respiration and as such, wouldn't exist...

Bring the Gold's picture

I tend to agree. His grasp of English, and economics leads me to believe he either is one tic shy of full blown autism barely lingering in Asperger's land, or more likely he's a guy who takes tremendous joy in being a Jolly Green Giant sized Troll. 

Bob's picture

My take, fwiw, is that he's the best satirical troll yet.  Bar none.  Including Hamy.  Hell, all the others who've passed into retirement may actually be the creations of this same artist . . . but this one is the best yet, in any case. 

True art. 

Hell, I don't know which way to vote on his shit, it's so good. 

Bring the Gold's picture

Yep, his handle is the give away. I am still shocked that people haven't caught on. I guess it's because this forum is rife with shills, useful idiots and status-quo government/wall street teat suckers, who make arguments basically identical to his.

Intentional or not, it's pure comedy gold.

Ned Zeppelin's picture

Nah, no one is that dumb. Right?

Wait. . .

LowProfile's picture

Think about it:  Who gets million dollar bonuses?

Would they post here?


WonderDawg's picture

I can't understand why the American public is not OUTRAGED that we've allowed a private banking cartel to determine our nation's monetary policy.

LongBallsShortBrains's picture


They don't care who determines policy.

The American public wants low rates for refis and new cars. And cnbs says low rates are good for the conomy.

The beast doesn't seem too bad when you have been nursing on the tit of the beast.

Just one (or two). More refis ..... Promise

Bring the Gold's picture

Well that's better than licking the balls of...wait...damn your avatar!

It was funny the first week or so, now it makes me cringe even if your philosophical response to the T&A is sound. Glad I work from home, no doubt ZH is blocked on a VAST swath of company/state computers.

DormRoom's picture

If the Fed doesn't act now, and the Republican-Tea Party take control of Congress & the White house, they won't be able to do anything in 14 months.  So they might as well go balls to the wall now.

walküre's picture

Makes no sense. The Fed will be able to deploy alot more and be more effective in 14 months when the Dollar looks better the money that is already in circulation has entered the economy instead of being hoarded at negative interest (considering inflation).



Ruffcut's picture

Who is outraged by qualitative Evil and milliondollarboneheads?

mick_richfield's picture

I can't understand why the American public is not OUTRAGED by this political meddling!

Um .. because this is supposed to be a republic?

I used to think that you were the best new troll on ZH, but I'm sorry -- you're not doing a good enough job of simulating a personality. 

Turing Test grade:  0.40  ( fail )

healey's picture

That is retarded...abolish the FED. A State-run bank is one of the tenets of the Communist Manifesto.

Popo's picture

Tyler, don't fall for the Kabuki.  

The letter is an act, nothing more.  

The Republicans themselves are *deeply* in favor of more QE, but they're playing it this way so they can pretend to be the party of "fiscal conservatism". 

Everyone knows the Republicans are equally in the pocket of the bankers,  and if they were even remotely serious about stopping the Fed they'd be hard at work on the bill to audit the Fed (which they are almost universally opposed to).

There are no differences between "Banker Party D" and "Banker Party R".

Politicians -- ALL POLITICIANS -- are deeply in favor of more QE because it lets them kick the can down the road again.   There are no responsible politicians in Washington.  There are only the occasional performances of responsibility because they serve to damage the other party.

SWRichmond's picture

Yes, and I also loved this: "sound monetary policy..."  Who do they think they're kidding?

SeverinSlade's picture

I'm pretty sure Tyler isn't suggesting that the Republocrats that wrote this letter actually believe a single word of it.  Especially considering that every man that signed it is in favor of Anglo-American imperialism.  Kind of hard to preach small government when you believe in using your military to police the world.  I'd ask all of them how they expect to pay for our military if the Fed doesn't continue to monetize US debt.

GeneMarchbanks's picture


You do realize that they need something to point to when the beheadings begin?

Repubs are Machiavelli compared to Dems...

mick_richfield's picture

That's a good point.  In fact -- by analogy with the way politicians cast many of their votes -- this letter indicates that these men know that QE3 is already a done deal.

Spaceman Spiff's picture

There is a difference in the parties.   The leadership is another story where both want more QE, but on the individual level there is a difference.   I would say that between the two parties, there are more individuals on the pub side who bothered to pay attention to the fed and are outraged by the monetization.    There is just a massive disconnect with their leadership who pays lipservice to them.   (see this letter as opposed to taking action against the fed and their dual mandate).   I would say that those who believe in an active federal government are more likely to support the fed.   

walküre's picture

The letter is an act.

OF COURSE IT IS! Politicians are by extention ACTORS! I know enough of them personally and privately to say this.

Every statement and every "act" is politically motivated!

But you are mistaken about the motivation of this letter!

What is the main objective of a politician? Getting elected to win of course!

Further QE at this juncture will make Obama a hero and all but confirm his 2nd term!!!!

Giving Obama 3+ trillion Dollars is the equivalent to handing Nero a flame thrower! He can't MISS!

Rockfish's picture

Yes +1010

They all belong to the "Banker Party SQ (status quo)

Corn1945's picture

The Federal Reserve needs to go if this country is to have a future.

It is simply astounding that a bunch of unelected bureaucrats who have never held a real job before is allowed to make these decisions.

Nascent_Variable's picture

Exactly.  And, the bankers who pull the strings behind the scenes are incensed that elected representatives of the people would dare to write them a polite letter asking them not to continue their disasterous policies.  The audacity of the banksters is astounding.

That said, this is pure political maneuvering by Boehner and Co.  They're doing the right thing for the wrong reasons.  But when the deck is stacked so heavily against the People, we'll take what we can get.

stirners_ghost's picture

"this country"

Are you referring to the grand extortion scheme called government, or its victims?

Or don't you make that distinction? Judging by the nationalistic brand identity you've chosen for yourself, I won't be surprised if you conflate them.

Look--as long as "the country" remains loyal to ideals of lords, subservient to patriotic spirits, and wholly bought-in to principles of Society, Humanism, and every other sacrificial altar of self... it has no future of its own, anyway.

Forget the Fed. The FRB's power derives from government's exclusive license to inflict violence on you for the "greater good" (invariably, its own good). Specifically, legal tender laws demand that you accept Federal Reserve Notes as settlement of debts and obligations. That gun in your back isn't held by the Fed; they only profit from it. Remove the gun, and the Fed's power over you vanishes.

monmick's picture

Now there is not even the pretense of independence...

Josh Randall's picture

Reverse Psychology B!tches!

SeverinSlade's picture

"...sound monetary policy should be conducted free of political interference."

Because that's precisely what the founding fathers envisioned...A private bank to control the currency of the people...Ironic because that's precisely what they warned us about.

There should be no such thing as "monetary policy."  Central planning doesn't work.  Fuck it, I'm just preaching to the choir here.

SWRichmond's picture

One of the reasons I spend less time here is because I have chosen to preach to those who need the message.

SeverinSlade's picture

I hear you.  It's tough though.  I use every opportunity I get daily to try and wake people up.  The general response I get is a blank stare.  Some idiots even go so far as to call me a conspiracy theorist by saying that the Federal Reserve is a private bank that is not a government entity.

Bob's picture

I was wondering about that, old timer.  Good to see ya!  Y'all right?

equity_momo's picture

Fuck me thats some desperate rationalizing from JP Morgue.  Why dont they look at Bernankes Horoscope whilst theyre at it too.

fuu's picture

You can almost smell the desperation out of 270 Park Avenue.