EconomicCrisis.US

The Federal Reserve and federal government should maintain policies that stimulate the US economy until unemployment begins to retreat and the threat of a destructive downward cycle of prices known as deflation recedes, Eric Rosengren, president of the Federal Reserve Band of Boston, said today.

Rosengren, addressing the Greater Boston Chamber of Commerce, said that policy makers risk undermining a fragile recovery if they move too soon to raise interest rates, eliminate Fed lending programs, cut federal spending, or raise taxes to reduce the federal deficit.
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The U.S. Federal Reserve will carefully evaluate economic forecasts to judge exactly when and how to exit out of its extraordinary rescue programs, and the withdrawal will happen “well before” inflation has a chance to rise out of control, the Fed’s vice chairman said Wednesday.

“We must begin to withdraw accommodation well before aggregate spending threatens to press against potential supply, and well before inflation as well as inflation expectations rise above levels consistent with price stability,” said Fed Vice Chairman Donald Kohn in a speech to the Cato Institute.
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A year after the financial system nearly collapsed, the nation’s biggest banks are bigger and regaining their appetite for risk.

Goldman Sachs, JPMorgan Chase and others – which have received tens of billions of dollars in federal aid – are once more betting big on bonds, commodities and exotic financial products, trading that nearly stopped during the financial crisis.

That Wall Street is making money again in essentially the same ways that thrust the banking system into chaos last fall is reason for concern on several levels, financial analysts and government officials say.
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Four months after its creation, a congressionally appointed panel modeled after the 9/11 Commission and the Iraq Study Group is opening a 15-month investigation into the causes of last year’s economy-crippling financial collapse.

The 10-member, bipartisan Financial Crisis Inquiry Commission holds its first meeting Thursday. With a budget of $5 million, its instructions are to submit findings to lawmakers by December 2010, long after Congress hopes to have a new regulations in place for preventing another Wall Street meltdown.

That deadline also assures that the findings won’t have any impact on the 2010 congressional races.
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