Baum on Money: Fed Punts, Congress Postures
Good morning, all. And welcome to your post-Fed edition of the taper that wasn't.
Fed says, I'm from Missouri
The Federal Reserve got cold feet yesterday, deciding it needed more evidence the economy was making steady progress before cutting back on its bond-buying program. At his press conference, Fed chair Ben Bernanke back-tracked on earlier statements that the Fed expected to be done with asset purchases by the time the unemployment rate hit 7 percent. It's not a "magic number," he said. The action, or inaction left many folks confused. In other words, they are no different than the folks setting policy.
Economy too weak for Fed to taper; stocks close at record highs
Talk about a disconnect. You have to wonder what policy makers think when they read statements like that. I'm afraid what they're thinking is: This is how it's supposed to work. Bernanke has explained that asset purchases work by pushing up the price of those securities and related assets. No change in the program means party on until Bernanke pulls the proverbial punch bowl away. Or -- a more apt analogy -- until he starts spiking it with less liquor.
Congress must increase the debt limit
Congress' Joint Economic Committee held a hearing yesterday on "The Costs of Debt-Limit Brinksmanship." The Urban Institute's Don Marron was among those who testified. His message was simple: Congress needs to raise the debt limit to avoid harming the still-fragile economy. And while lawmakers are at it, they should "rethink the debt limit and the entire budget process" to make it more effective and less susceptible to partisan shenanigans. Oh, and in case you needed to hear this again, the long-term budget outlook is still "challenging."
Getting to the "replace" part of "repeal and replace"
With less than two weeks to go before the state insurance exchanges open for business, the Republican Study Committee, a group of ideologically-pure conservatives, finally unveiled an alternative health-care plan. The plan would increase competition by allowing Americans to purchase insurance across state lines. It would expand health-savings accounts, offer individuals an income-tax deduction to buy insurance and reform medical malpractice laws so doctors wouldn't have to practice defensive medicine. Just one question: Did the House have to vote 41 times to repeal or amend the Affordable Care Act before offering something to replace it?
File this in the Lehman anniversary good-to-know file
What's beneficial in social settings may be dangerous to your financial health, according to a new study. A researcher at Cal Tech has found that "the same brain functions that enable people to be socially successful can also lead to financial ruin," writes Bloomberg News' Makiko Kitamura. "In bubble situations, traders become less driven by explicit information, like actual prices, and more focused on how they imagine the market will change." Does that mean the socially awkward have an edge on Wall Street?
(Caroline Baum is a Bloomberg View columnist. Follow her on Twitter.)