10/16/2012 08:04 am ET

Maybe The Fed Hasn't Done Enough: Seven And A Half Things To Know

Thing One: When Doves Cry: Ron Paul and Rick Perry may not like Ben Bernanke's Federal Reserve, but they should thank their big, bright Texas stars that Bill Dudley is not in charge of the central bank.

Dudley instead runs the New York Fed, which is arguably the most important branch of the Fed, as it does all the central bank's trading -- or, as Paul and Perry might call it, money laundering. But he has only one vote when it comes to setting monetary policy for the central bank. And if Dudley had had his druthers, the Fed would have done a lot more to help the economy. Dudley, a Goldman Sachs alumnus, is a militant money printer, or "dove," as he showed in a speech yesterday at a National Association for Business Economics conference in New York. Dudley rattled off a list of reasons why the recovery has been weak, and one of them was that the Fed has not been aggressive enough.

"[M]onetary policy, while highly accommodative by historic standards, may still not have been sufficiently accommodative given the economic circumstances," he said. This will come as a shock to Paul, Perry and the other vocal Fed critics, who have all but accused the Fed of committing treason by slashing interest rates to near zero and then buying up hundreds of billions of dollars' worth of Treasury and mortgage bonds to support the economy. But Dudley thinks the Fed should have gone even farther, by essentially promising to keep the money spigot open forever if need be. And that's just what it did at its latest policy meeting.

Not only is the dovish wing of the Fed, led by Dudley, bearing the criticisms of the Pauls and Perrys of the world, and wrestling with the inflation hawks on the Fed's policy-setting committee, but it is also being hampered by the big banks, Dudley noted. The dominance of the mortgage market by Wells Fargo, JPMorgan Chase and Bank of America is hurting competition for mortgages and keeping consumer mortgage rates higher than they should be, Dudley warned, making the Fed have to work even harder to help the economy.

Thing Two: Debate Night: So there's another presidential debate tonight! Hooray. Drinking games. Umms. Lies. Lots of talk about deficits and no talk about anything we really care about. And the sad part is, the winner of the debate and/or the election is going to have a really lousy job, because of the fiscal cliff, writes Jackie Calmes in The New York Times.

Thing Three: iPhones, Folding Maps Drive Retail Sales: In one hopeful sign for the U.S. economy, and maybe President Obama's re-election chances, consumers seem to have no trouble spending money these days. The Commerce Department yesterday reported a bigger-than-expected jump in retail sales, capping off the best two months for retail spending in two years, according to the Associated Press. A lot of the money was blown on the new iPhone 5, but people bought actually useful stuff, too, including building materials, garden supplies and clothing.

Thing Four: Spain Very Close To Asking For Bailout Now: The global economy has been on pins and needles for months now, waiting to see if Spain is going to ask for the bailout that everybody knows it needs. And the waiting is almost over now, the Wall Street Journal writes: The country is thinking very hard about asking for a line of credit from the European Union. Take your time, Spain, what's the hurry? The New York Times explains what's the hurry, saying that the longer Prime Minister Mariano Rajoy waits to ask for a bailout the worse Spain's economy is going to get, and the more the bailout is going to cost.

Thing Five: Cash Flees China: For many years, China has been a prime destination for much of the world's cash, with investors betting on big payoffs from the country's booming economy. But now cash is starting to move in the other direction, the Wall Street Journal writes, with Chinese companies and wealthy individuals investing around the globe. On the one hand, it looks like a sign of China's growing economic power. On the other hand, it may also be a sign that Chinese investors don't see many appetizing investments at home, given China's sluggish economy.

Thing Six: Tainted Drug Risk Spreads: Government health officials are warning that more drugs produced by the New England Compounding Center in Framingham, Mass., may have been tainted than just the company's fungus-infected steroid, which has already killed 15 patients and sickened hundreds more with meningitis, the The New York Times writes. If other drugs, including those used in heart and eye surgeries, were tainted, then "a significant number" of patients may have been exposed, the NYT writes. As we've mentioned before, the compounding pharmacies that produce these drugs are lightly regulated, and Reuters today has a depressing tale of just how aggressively the pharmacies have fought regulation.

Thing Seven: Europe vs. Google: European regulators will today unveil a strongly worded letter to Google, accusing it of not being open enough about all of the data it collects about its users, the Washington Post writes. Regulators in the U.S. and Europe are meanwhile gearing up for more muscular approaches to Google than the strongly-worded-letter approach, including "major antitrust cases against the company." Why do regulators hate corporate success? Why can't companies exercise their constitutional right to quietly collect data about you?

Thing Seven And One Half: Nightmare On Bro Street: For your Halloween enjoyment, via Buzzfeed, here are 45 pictures of bros having the crap scared out of them at a haunted house.

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Calendar Du Jour:

Economic Data:

8:30 a.m. ET: Consumer Price Index for September

9:15 a.m. ET: Industrial Production for September

10:00 a.m. ET: NAHB Housing Market Index for October

Corporate Earnings:


Goldman Sachs



Johnson & Johnson



Heard On The Tweets:

@EpicureanDeal: I mean, just look at Greg Smith. This is the kind of nebbish the most powerful investment bank in the world hired for its trading floor. QED

@morningmoneyben: If you think throwing away a cheddar salad is bad, I was once on a trading floor where a trader through a sub at an interns head.

@realDonaldTrump: Based on very popular demand, I will be live tweeting tomorrow night during the Presidential debate.

@jbarro: Fixed MT @realDonaldTrump: Based on very popular demand, I will be retiring from public life and relocating to Siberia

And you can follow me on Twitter, too: @markgongloff



11 Lies About The Fed