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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If the economy were a contestant on one of those weight loss reality shows, it would be in terrific shape now. But the economy isn’t a weight loss contestant (though its losses are impressive) and it certainly isn’t in good shape. The challenge for journalists is finding words to describe depths few have seen.

With the blueprint for resuscitating the banking industry, for better or worse, now in place, President Barack Obama has turned his attention to the housing market, announcing a $275 billion government effort to help as many as 9 million homeowners at risk of losing their homes.

Slam, pan, bemoan, disappoint. Praise was nowhere to be found in the headlines reporting reactions to the much-anticipated bank bail-out plan Treasury Secretary Timothy Geithner announced two weeks ago. 

Legislation allowing bankruptcy judges to modify the terms of home mortgages, introduced, as expected, in the early days of the new Congressional session, received an unexpected boost when Citicorp broke ranks with the banking industry and withdrew its opposition to the measure.