When the head of Countrywide started talking crisis instead of confidence, we couldn’t help but chuckle a bit at the naked self-interest of it all. It was clear that he hoped widespread fears of a recession would spur the Federal Reserve to make a dramatic rate cut, and possibly put some nice coin in his own pocket by reviving the troubled mortgage market.
But it’s not just the boomeoisie who are ringing the recession alarm bells. As reports from the Federal Reserve’s fishing trip in Jackson, Wyoming filter in, it’s becoming clear just how faith that spending and borrowing are the key to prosperity has gone toward becoming the new orthodoxy. They all look like Keynesians now.
Former Reagan Administration official turned Harvard University economist Martin Feldstein told the fisherman Fed Reservistas that our housing slump threatens a broader recession. To avoid a recession, he called for the Fed to lower interest rates by a cool—or should we say, hot—one hundred basis points. From 5.25 to 4.25.
There's a strange disconnect going on. The president and other politicians fear for their political lives of being accused of 'talking down the economy' by giving realistic assessments of our prospects. The state of the union is always strong. But Marty and the boomeoisie know all too well that most Americans will never hear their words. They have a different audience. When they cry "recession" it's not just egg-heads crying over-broken eggs, as Bloomberg’s Scott Lanman reminds us that Marty wasn’t at just some ordinary economic conference. Marty, for instance, was in an expensive resort town talking to some of the most powerful folks in the world.
Bernanke wasn't in the room for Feldstein's speech, though most other Fed officials were, along with central bankers and economists from around the world who traveled to the annual mountainside conference hosted by the Kansas City Fed bank.
``Marty is a guy of good judgment,'' said former Fed Governor Lyle Gramley, who attended the event. ``Everybody in the room recognizes that. Everybody, including the people at the Fed, will think carefully about what he said.''
As an aside, it strikes us how increasingly inapt the label of “bulls” is for many members of the boomeoisie. The bull is a supremely dignified, proud and heroic animal. This is most clearly seen not in its charge against offending matadors but in the way it almost inevitably dies in the corrida. Even when the killing is botched, and the bull is bleeding badly on the sands beneath it, the bull collapses with a magnificent silence. The so-called bulls of Wall Street have proven themselves to be anything but silent in death. Each day brings new yelps and whines. It’s as if someone had brought a puppy to bullfight.
Feldstein Warns of U.S. Recession, Urges Fed Rate Cut [Bloomberg]