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Posts Tagged ‘The Fed’

The Senate committee by a vote of 18 to 5 agreed to recommend the appointment of Timothy Geithner to the office of Secretary of the Treasury. With the economy under siege by a financial and credit crisis that is contributing to rapidly expanding unemployment and an continued volatility in the markets, it was a foregone conclusion that the Geithner nomination would be approved by the committee.

Geithner has been under scrutiny for his failure to pay self employment taxes while an employee of the IMF. He recently paid the tax due and the subsequent penalties following his nomination by then President Elect Barack Obama. His nomination should be approved by the full Senate today.

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It is the politics of the unusual in Washington these days as evidenced by the Senate confirmation hearings of Secretary of the Treasury nominee, Timothy Geithner. The Obama nominee to head the treasury department, apologized today for mistakes made on previous tax returns, where he failed to pay $35,000. of self employment taxes, while employed by the International Monetary Fund. There is little doubt though that his appointment will be confirmed.

Geithner’s tax issues, have been well publicized and under any previous administration his nomination would have been withdrawn, for the Senate, would surely reject the nomination of an individual responsible for oversight of the Internal Revenue Service, who had filed questionable tax returns and failed to pay the taxes due, until nominated for his new post.

However, we are in the midst of a severe financial and credit crisis of which Mister Geithner is intimately familiar with in his role as President of the Federal Reserve Bank of New York. He along with Federal Reserve Chairman Ben Bernanke and former Treasury Secretary Hank Paulson have been the architects of the various financial bail outs of the last several months.

Geithner’s nomination was well received by Wall Street and Capitol Hill at the time it was announced given his involvement in the financial crisis to date. Failure to confirm his appointment would only result in additional turmoil in the market. We must take Mister Geithner at his word that his tax issues, were an oversight that won’t be repeated and that he will be as gifted, in his role as Treasury Secretary, as the political establishment believes him to be.

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A tip of the hat to the Fed for their dramatic response today to the continued economic plight that we find ourselves in as we count down toward 2009. I can’t imagine that  many Americans ever envisioned the Fed establishing a Fed funds target rate of between zero and one quarter of a percent but,  that is exactly the target that the Fed’s Board of Governors announced today.

Bernanke’s Fed continues to make the right moves to provide stimulus to a beleaguered economy. The stock market  responded with a strong embrace of the Fed’s action today as  the Dow was up nearly 360 points and the move today could signal a year end rally in the market.

With the Fed funds rate at historic lows and the various actions the government has taken to both provide stimulus and prevent further  implosion of our financial markets and institutions  it would appear that we may begin to take heart that these actions will prove fruitful.

Granted,  unemployment, continued erosion in the housing market, an auto industry seeking a lifeline and an extraordinary fraud by a prince of wall street,  all bring pressure to bear on the fragile psyche of the consumer and threaten further economic decline.

However, if the markets can indeed rally from this point through the year end and December 401k and other investment portfolio statements begin to show an improvement,  investors may enter the new year with the feeling that perhaps we are emerging from the devastation of 2008 to a more promising 2009.

The aggressive action by the Fed and the promise of further stimulus by the new administration and a democratic Congress bent on additional stimulus in the new year should bode well providing, certain of our lending institutions remember why they were prevented from failing in 2008 and begin loosening their stranglehold on the credit markets and initiate prudent lending during the year ahead.

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