Craig Torres and Steve Matthews
December 10, 2008
The Federal Reserve’s interest-rate target is getting close to zero, and so is the power of the Fed’s regional bank presidents.
- A d v e r t i s e m e n t
The district chiefs’ authority over borrowing costs has been marginalized in the past two months as Chairman Ben S. Bernanke and the Fed Board of Governors in Washington made their own decisions on emergency measures to flood the economy with cash.
“The Board has usurped authority,” said William Poole, former president of the St. Louis Fed and now a senior fellow at the Cato Institute in Washington. “This dramatic change in policy direction has not been announced or even acknowledged.”
Bernanke must now try to bring the Federal Open Market Committee, which includes district presidents and Fed governors, along as he turns to more radical strategies, such as buying Treasuries to drive down long-term rates. A lack of consensus at next week’s FOMC meeting could result in muddled communication that confuses investors and undermines confidence.