On Eve Of Critical FOMC Decision, Republicans (Re)Send Letter To Bernanke Demanding No More QE

Tyler Durden's picture

Nine months after the very same quartet of republicans, headed by John Boehner, sent a letter to Bernanke protesting the launch of QE2, this time the GOP has waited until a mere 24 hours before the actual announcement with an identical, if preemptive, message, namely: don't print, or stated differently, "we submit that the board should resist further extraordinary intervention in the U.S. economy, particularly without a clear articulation of the goals of such a policy, direction for success, ample data proving a case for economic action and quantifiable benefits to the American people." And while the political undertone of the letter is all too obvious: i.e. prevent any additional Obama-benefiting stimulus in the economy through the only conduit Obama has left, courtesy of Fiscal stimulus being snarled for good due to the republican majority in the House, Boehner et al bring up a valid point, which is that the Fed policy now accentuates market uncertainty and promotes trade wars: precisely the topics discussed in an earlier article today. As stated by Boehner: "Our long-term growth depends on restoring confidence and certainty in our fiscal, regulatory, and trade policies -- and not on government’s willingness to engage in additional stimulative measures. When asset prices increase due to anticipated Federal Reserve policy rather than economic fundamentals, it increases the potential for speculative action and erodes confidence in the economic outlook, making it more difficult to generate sustainable growth." Regardless of its actual merit, one thing is without doubt: QE3, and the Fed, just become once again critically politicized, and as such, even more market uncertainty is imminent. All that said, the theatrical optics of this action are quite glaring.

Full letter:

Dear Chairman Bernanke,

 

It is our understanding that the Board Members of the Federal Reserve will meet later this week to consider additional monetary stimulus proposals. We write to express our reservations about any such measures. Respectfully, we submit that the board should resist further extraordinary intervention in the U.S. economy, particularly without a clear articulation of the goals of such a policy, direction for success, ample data proving a case for economic action and quantifiable benefits to the American people.

 

It is not clear that the recent round of quantitative easing undertaken by the Federal Reserve has facilitated economic growth or reduced the unemployment rate. To the contrary, there has been significant concern expressed by Federal Reserve Board Members, academics, business leaders, Members of Congress and the public. Although the goal of quantitative easing was, in part, to stabilize the price level against deflationary fears, the Federal Reserve’s actions have likely led to more fluctuations and uncertainty in our already weak economy.

 

We have serious concerns that further intervention by the Federal Reserve could exacerbate current problems or further harm the U.S. economy. Such steps may erode the already weakened U.S. dollar or promote more borrowing by overleveraged consumers. To date, we have seen no evidence that further monetary stimulus will create jobs or provide a sustainable path towards economic recovery.

 

Ultimately, the American economy is driven by the confidence of consumers and investors and the innovations of its workers. The American people have reason to be skeptical of the Federal Reserve vastly increasing its role in the economy if measurable outcomes cannot be demonstrated.

 

We respectfully request that a copy of this letter be shared with each Member of the Board.

 

Sincerely,

 

Sen. Mitch McConnell, Rep. John Boehner, Sen. Jon Kyl, Rep. Eric Cantor

 

 


And here is the letter sent back on November 17, 2010, after QE2 was already in process:

 

The Honorable Ben S. Bernanke
Chairman
Board of Governors of the Federal Reserve System
20th Street and Constitution Avenue, NW
Washington, D.C. 20551

Dear Chairman Bernanke:

We firmly believe that monetary policy decisions by the U.S. Federal Reserve must be free and independent from political pressures. At the same time, the Federal Reserve should be open to receiving input and data from a wide range of sources. This combination preserves confidence in the credibility and effectiveness of decisions made by the Federal Reserve.

It is with that understanding that we write to express our deep concerns over the recent announcement that the Federal Reserve will purchase additional U.S. Treasury bonds, the so-called Quantitative Easing 2 (QE2). While intended to improve the short-term growth of the U.S. economy and help maintain a stable price level, such a measure introduces significant uncertainty regarding the future strength of the dollar and could result both in hard-to-control, long-term inflation and potentially generate artificial asset bubbles that could cause further economic disruptions.

The Federal Reserve’s recent move has also generated increased criticism and action from other central banks and governments. We appreciate that such comments must be examined within the context of which they have been offered. However, any action taken by our nation or foreign nations that impairs U.S. trade relations at a time when we should be fighting global trade protection measures will only further harm the global economy and could delay recovery in the United States.

Perhaps most damaging, we believe that QE2 is giving the impression that the Federal Reserve will keep making new and different attempts to boost the short-term prospects for the economy. Our long-term growth depends on restoring confidence and certainty in our fiscal, regulatory, and trade policies -- and not on government’s willingness to engage in additional stimulative measures. When asset prices increase due to anticipated Federal Reserve policy rather than economic fundamentals, it increases the potential for speculative action and erodes confidence in the economic outlook, making it more difficult to generate sustainable growth.

We hope you and the other Board Members will keep these concerns in mind as you review and discuss these issues in the coming months.

Sincerely,

Mitch McConnell
U.S. Senator

John Boehner
Member of Congress

Jon Kyl
U.S. Senator

Eric Cantor
Member of Congress

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malikai's picture

Next, they'll go and charge him with treason or some crazy thing!

Waffen's picture

Damn Republicans trying to mess with my Silver.

 

Look, we are gonna hyperinflate anyhow, just get out of the way all you phony conservatives.

unununium's picture

These dummies want no QE3 because they believe it might actually work.  How utterly amusing.

dlmaniac's picture

Should these monkeys seriously cut spending Fed might have less incentive to launch QE.

espirit's picture

P.S. - We the above also ask that the Bernank resign so that he be replaced by a much harder working chimpanze, that will work for banannas in the Bananna Republic the Fed has created.

Christophe2's picture

This is just more kabuki theater, with the Repubs saying reasonable things about the Fed, while the Dems (Obama) blab about how the uber rich should get taxed more.  None of that talk will amount to anything, but the sheeple of each appropriate stripe will gobble it all up and feel encouraged to continue voting for 'their' party.  The talking heads on TV and in the press will either laud it or attack it, depending on the target audience, and indeed even here on ZH we'll write a bunch of comments on it.

 

Having a sold-out career politician speak (reasonably or not, it matters little) is as eventful and meaningful as a cow farting...

Crisismode's picture

You are about an hour short.

 

Too bad.

tiger7905's picture

Some updates and pictures from Ocuppy Wall Street.

http://goldandsilverlinings.com/?p=1647

Tijuana Donkey Show's picture

Butakke theater....... don't eat the cookies

Hayabusa's picture

I couldn't have said it better myself... Christophe2 is on target.

 

Hayabusa's picture

I couldn't have said it better myself... Christophe2 is on target.

 

boom goes the dynamite's picture

The dummies think another round of herion for the stock market or QE3 might actually work to save Obummer's job.  Now, that is amusing.

maxmad's picture

Ya right it might Effin Vodka work!!!  LOL!!!  Haven't we heard that 3 or 4 times before

jeff montanye's picture

off topic but did anyone else notice the similar red hammer/green hammer right shoulder we may be putting in?

jackinrichmond's picture

lets start calling it what it is..  QE5

1-QE with bush

2-with obummer

3-"QE light"

4-$16T european bank injection

...not to mention tax credits, corporate bailouts and debt-holes

porrannor's picture

Yes, another 20 QEs and it just might work. Just becuase the first 19 didn't work it doesn't mean the next one will not... At some point sombody has to take the toyes away  from him or he is going to hurt himself and the rest of us.. he thinks it's a game...

ihedgemyhedges's picture

Isn't that like telling an alcoholic to "PUT THAT BOTTLE DOWN" after he's already had the first 21 of a case.  Yeah, good luck with that repubs.......

James T. Kirk's picture

Damn Republicans trying to mess with my time line. If they don't print, the Enterprise will never exist. I hate farming.

Beam Me Up Scotty's picture

The Enterprise always saves the day.  Do you want to be beamed directly to the bridge captain?

James T. Kirk's picture

That was my concern, Scotty. Don't want to end up splattered all over the 23rd century.

James T. Kirk's picture

+200 yr FEDeration notes. Don't leave reality without 'em.

chet's picture

Thank god the "fiscally responsible" Republicans are here.  I feel safer already.

Sequitur's picture

Where the fuck were these same Republicans when Greenspan was flooding the markets with money during the housing bubble, and they ignored FBI reports of massive mortgage fraud?

Where the fuck were these same Republicans when Bush was trying slot best bud and arch-fraudster Enron CEO Ken Lay for energy secretary?

Where the fuck were these Republicans when Brooksley Born warned about the impending derivatives implosion, yet they told her to pound sand?

Where the fuck were these Republicans when former SEC Chairman Chris Cox (also a Republican, and arguably worst SEC chairman ever, though Harvey Pitt is close second) allowed these goddamn bankers to lever up 30 to 1?

Oh, and where the fuck were these Republicans when we had the kickoff to this entire party: Greenspan orchestrating the LTCM bailout?

http://money.cnn.com/1998/10/01/economy/greenspan/

Screw Republicans. Screw the Democrats as well, because goddamn if they haven't blown a budget hole as big as Bush, with zero enforcement against these banks.

boom goes the dynamite's picture

relax and buy 10,000 shares of TZA and wait 9 months, you'll be fine.  it's a game, learn to play.

spanish inquisition's picture

Bitch as they want about not wanting QE's. None of them turned any Wall Street campaign cash away that came directly from the bailouts.

Ned Zeppelin's picture

Nice attitude, Seq. You got it right. 

Bring the Gold's picture

Rock the fuck on Sequitor and well said from start to finish.

Rick64's picture

   They are waiting until their puppet gets elected. This is just political rhetoric and if the president was republican they would be stimulating the hell out of the economy(corporations & banks). Of course they don't want to stimulate on the chance that it might make Obama look good.  The only thing the parties care about is who is going to make the big money which translates into whichever party is in power thats the one the corporations and banks are going to give the big bribes, favors, donations, ect.. to.  

Tijuana Donkey Show's picture

Paging Rick Perry, paging Rick Perry, the country is ready for your Texas fried bullshit now.

Pike Bishop's picture

Nice voice Seq.

It's like everybody has the same brain damage in the memory area.

Including the '70s, there have never been such fucked Economy and Markets. Unfortunately, these charades can't subsist without asset and monetary artifice.

The most fucked thing about is that the Republicans believe if the whole thing collapses with Obummer in the WH, then it's his fault. And they get some kind of Assholes' Free Spin.

It's not government that is fucked, it's the Assholes who are in government.

The Democrats only claim to fame, after the Republicans had turned DC into a painful defecation, was that they looked at the curtains, and just loved what the Republicans had done with the place.

So let's be clear about the Economic and Markets BrainFart of All Time... because we are stuck with a plethora of geniuses who want to blame the current Shithole on some guy who died years ago named Keynes. He's dead and doesn't have a fucking thing to with what is going on. He's not even in an election year

The same Neo-Classical, Neo-Liberal, Neo-Conservatives who fucked the Economy are the same ones who had complete control over this fucked excuse for a Peter Pan/Tinkerbell Recovery. Of particular note are the twin Masters of Disaster.. Greenspan and Bernanke.

You can't get any more NeoClassical, Neo-Liberal than them.

When it was Gut-Check Time, the first thing The Industry of Assholes did was take their private distortions, and have the public pay for them. Next thing they did was blow so much air into the Markets, there is none left for sane people to breathe.

Whether Financial or Political, we don't need these people. We just need that which they are supposed to do.

And this entire crew has been up way past their bedtime for ten years.

 

DeadFred's picture

Are there any options if/when Bernanke thumbs his nose at them and us. Can he be unconfirmed, maybe they pass the audit bill, do something to shake up the system? Other than giving free money to their owners one reason the Fed says they intervene is to create the perception of improvement in the economy. Perhaps they wouldn't be as inclined to do it so someone had the stones to make a scene about it. It would make a real nice election issue if nothing else.

duckhook's picture

Auditing the Fed would show how much money was given to the banks and would handcuff the FED in the future.The fed knows that amny politicians  on both sides are very unhally with their interset rate manipulation;therefore  there will be no action tomorrow not even operation twist

Zero Govt's picture

Sending auditors into the Fed is useless, they'll cook anyones books as they have done the Banks books since 2007 on... forget the crones of accountancy, just send the Police in

..afterall Bernank is now party to the biggest fraud criminal racket in American history, the Banks mortgage fraud and selling sugar coated turds (arrest the Ratings Agencies Executives too while you're at it). Benny bailed out this mass national criminal activity and the den of thieves who perpetrated it

...Benny is more than a stupid chump, he's a criminal too

upWising's picture

NO the Republicans will await a reply to their letter. Bernie-Bob will write back to them and accuse them of BAD OPTICS>  This is a bit ironic since the whole crew of them subscribe to the Helen Keller School of Economic Theory.  I'm going long on White Canes and chirping WALK signals.  

upWising's picture

NO the Republicans will await a reply to their letter. Bernie-Bob will write back to them and accuse them of BAD OPTICS>  This is a bit ironic since the whole crew of them subscribe to the Helen Keller School of Economic Theory.  I'm going long on White Canes and chirping WALK signals.  

jdelano's picture

Don't want to be a downer but compelled to point out that if you all are right and Ben does print tomorrow, you'll only have a year or two to spend your pm profits before they are either worthless or confiscated. Another round of printing will lead to a very real fiat collapse and at least temporarily,!the imposition of a totalitarian regime--pms will be confiscated and/or there will be no shit from china to buy due to embargoes. Personally I'm holding out hope that not even ben is quite that stupid. Careful what you wish for.

Ned Zeppelin's picture

I think the basic ZH view in terms of the Big Picture is that Ben is dangerous and the Fed a menace that should be disarmed and dismantled as soon as possible. 

But there is also the ZH thread of trading and anticipating the moves by the Fed, and the consequences of their moves, in order to make money, which is not the same thing.   At that level the Fed is a given and its actions of concern as they relate to trading profits and positions, which does not need to consider the Big Picture - at least not for the moment. 

jdelano's picture

Yeah I get that-- dont get me wrong, I've had gld calls stacked to the roof since early 2010, just having a moment of clarity realizing this really isn't fun and games anymore. This next round of printing is going to have very real, very unpleasant long term consequences--and once they begin to manifest I believe we'll wish we'd spent our time here doing everything in our power to try and preempt the fed rather than scalping a few ephemeral profits off the last rounds of QE. And as far as the trade goes-- at the risk of committing sacrilege, I'm so convinced the Tylers are wrong on the timing of this one that I'm putting my money where my mouth is. There is a lot of merit to the argument that Ben will want to hold off on the bazooka until after Europe has imploded. Added to puts today and will hold them through the statement regardless of how giddy the market gets at the open. If I'm wrong I'll publicly bow to the tylers' wisdom.

Waffen's picture

Hyperinflation is going to happen.  Their is already enough dollars out in the world to have it, as I am sure you know we just need something to happen to cause the velocity of money to increase.

Whether the Fed Prints today or in a year or 5 years it doesnt matter in regards to what happens in the end.  The only thing is time, will it happen in a year or 3 years or 5 years?

I for one am sick of the wait, its slowly killing the country and delaying a reset.  Whether that reset is our version of Hitler or the French Revolution, or world government or Seccession and Balkanization, I dont know, but it will be the next natural step in this disaster.  The sooner we can move on to the next step the sooner we can heal this damn mess. 

X.inf.capt's picture

amen waffen

.

what ive been saying that years

great post!

gon4beer's picture

Agreed-all this posturing is like having a kid w/ a really bad upset stomach, but no one want's to see how that ends up, so we keep giving the kid medicine when what is really needed is a good vomit.  Putting off dealing w/ pain rarely leads to a clean resolution to the problem.

Bring the Gold's picture

Sure and if he massively disappoints then what? I'm gonna go with THAT is the reason troops are doing a Homeland tour. I prefer staving things off a bit longer, my family isn't quite ready but are finally seeing the writing on the wall. I need another year...just like Obama.

I say he prints and to be honest, IMO it's the lesser of two evils for my situation because a catastrophic deleveraging event would probably crush my families income and render most of us unemployed. I also think it would have similar totalitarian impositions along with world war type side effects. Damned if he does, damned if he doesn't. If he prints he buys us all a year to prepare assuming he is in the 3 Trillion range or more.

I prefer that he prints for those reasons. Selfish? Well yeah, but making a principalled stand and allowing a market crash, sovereign default-orama and cascading derivatives black hole that sucks in everything into it's cavernous maw doesn't seem particularly appealing either. Especially not the likely more imminent nature of that event should he fail to print.