Fed’s High Wire Inflation Fighting Effort Risks Triggering a Recessionary Fall

Imagine a high-wire act performed without a net.  That describes the Federal Reserve’s effort to curb inflation without crashing the economy.  Success will bring applause and relief; failure, a brief downturn, at best, with a prolonged recession the worst case outcome. 

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Reverse mortgage lenders, battling intensifying criticism from consumer advocates and some legislators, are now facing a financial squeeze as well. To close a widening budget gap in the Home Equity Conversion Program (HECM), the Federal Housing Administration (FHA) has slashed by 10 percent the maximum amount borrowers can receive in FHA-insured reverse mortgages.

Delivering an expected but nonetheless unwelcome defeat to the financial services sector, the House Financial Services Committee has approved legislation establishing a new Consumer Financial Protection Agency (CFPA), with broad authority to enforce compliance with consumer protection laws.

Delayed but not derailed, the homebuyer tax credit won a Congressional last week, as the House and Senate agreed to expand and extend the popular program into next year. Absent Congressional action, the credit would have expired November 30.

Economists have been warning for months that the recovery, when it began, would not be smooth. Last month’s statistics confirm that prediction providing enough ups and downs to support a bipolar diagnosis.