So the government is in the process of twisting the arms of Federal Reserve Board members to lower interest rates by as much as 2 percentage points over the next year, including potentially a whopping half-point cut next week. That will allow banks to go back to one of their favorite recession-delaying ploys: encouraging debt-strapped consumers to refinance their loans at lower rates.
If that doesn't work, the government has been making noises about creating something like a Marshall Plan for home foreclosures -- a giant bailout fund similar to one used during previous housing crises. Just for good measure, analyst Bove notes, the administration is engaged in other types of powerful job-creating fiscal stimuli as well, such as ramping up spending on defense, infrastructure and transportation construction. "The administration in power is not going to go into an election year in a recession," he insists.
While there's no real firewall between the Fed and the "government," its general independence - and belief in that independence - is thought to be rather important.
(ht Americablog)