Washington Extra – Under fire

November 9, 2010

benHe is not quite the loneliest man in the world, but Fed chairman Ben Bernanke must be feeling in need of a friend these days. First those nasty Tea party types stormed the capital with their distinctively un-Fed-friendly views. Dismiss them as extremists if you will, but they seemed to have been joined by an array of world leaders in their criticism of quantitative easing, the Fed’s purchases of U.S. government debt in an attempt to stimulate the economy.

The rest of the world fears the Fed’s action amount to a backhand form of competitive currency devaluation. Many Republicans fear the Fed is enabling profligate U.S. budgetary policy. Even Fed governors and regional presidents are uneasy. Governor Kevin Warsh warned on Monday the Fed was not “a repair shop for broken fiscal or regulatory policies” and that the Fed could lose its “hard-earned credibility – and monetary policy can lose its hard-earned sway – if its policies overpromise or underdeliver.” Dallas Fed Reserve Bank President Richard Fisher then chimed in, calling quantitative easing “a bridge loan to fiscal sanity.”

In the end, the effects of the Fed’s latest move on economic growth may not be that dramatic. Its effect on the Fed’s long-term credibility, though, are less clear, and perhaps more worrying.

Finally today, hats off to the New York Times’ Norimitsu Onishi, whose research into Obama’s childhood in Indonesia threw up some unexpected gems. The future president, a chubby kid known as Barry, was apparently also referred to a “the boy who runs like a duck.” His nanny, an openly gay man, had an affair with the local butcher before running off to join a group of transvestites known as the Fantastic Dolls. But however unconventional his upbringing, even then Obama seemingly had leadership qualities.

Once, Onishi reports, Obama asked a group of boys whether they wanted to grow up to be president, a soldier or a businessman. A president would own nothing while a soldier would possess weapons and a businessman would have money, the young Obama explained.

The other boys chose to become bankers or soldiers. “Then Barry said he would become president and order the soldier to guard him and the businessman to use his money to build him something,” said one of his former friends, Slamet Januadi. “We told him, ‘You cheated. You didn’t give us those details.’ But we all became what we said we would.”

Here are our top stories from Washington today…

Obama speaking to Muslims, shortens Indonesia trip

President Obama will make a major speech to the Islamic world on Wednesday before an erupting volcano forces him to make an early departure from the world’s largest Muslim-majority nation. Obama cut short his long-delayed visit to Indonesia due to concern that an ash cloud would prevent his taking off in time to attend a G20 summit. Before a crowd of 6,000, Obama will lay out broad themes of the U.S. relationship with Indonesia.

For more of this story by Alister Bull and Patricia Zengerle, read here.

US Republicans eye reviving tax cut debate in 2012

Republicans, emboldened by their big mid-term elections wins, are mulling backing a temporary extension of Bush-era tax cuts, which would tee up the issue to use against President Obama in 2012. “It’s a debate they (Republicans) would like to have.” said John Harrington, a former Republican staffer on the tax-writing House of Representatives Ways and Means Committee. “There is a view that Republicans did well in the recent tax debate.”

For more of this story by Kim Dixon, read here.

US House panel challenger Royce warns on QE2

The Republican challenger to the chairmanship of a key financial oversight panel questioned the Federal Reserve’s decision to buy $600 billion in government debt. Quantitative easing was unlikely to diminish uncertainty in the business world or boost lending, Representative Ed Royce told Reuters.

For more of this interview story by Kevin Drawbaugh, read here.

China, Germany slam U.S. policy before G20 summit

China has kept up a drumbeat of criticism of U.S. easy money policies, warning two days before a G20 summit that Washington could destabilize the global economy and inflate asset bubbles. Nearly a week after the Fed announced it was going pump as much as $600 billion into the economy, world leaders say the plan will flood global markets with cash without doing much for the recovery.  President Obama acknowledged in Jakarta that the G20 “still have a lot of work to do” to ensure balanced global growth.

For more of this story by Emily Kaiser, read here.

Big US banks set to pay more into FDIC fund

Large banks would be required to pay more into the government fund used to cover the cost of seizing failed banks under a proposal issued by U.S. regulators. Bank of America, JPMorgan Chase and Citigroup combined would pay about $1 billion more annually in assessments under the new liabilities-based system.

For more of this story by Dave Clarke, read here.

Pentagon working to solve mystery missile launch

U.S. officials are scrambling to explain a possible missile launch off the coast of Los Angeles, but a day after a vapor trail was caught on tape the incident remains a mystery. “So far we’ve come up empty with any explanation,” a Pentagon spokesman told reporters. “We’re talking to other parts of the U.S. government. We’re doing everything we can to try to figure out if anybody has any knowledge of what this event may have been.”

For more of this story, read here.

Company errors, complacency preceded US spill-panel

A co-chair of the White House Oil Spill Commission took square aim at mistakes by BP and its partners that led to the Gulf oil spill, saying on Tuesday that they illustrate the need for a better safety culture in the oil drilling sector.” BP, Halliburton and Transocean are major respected companies operating throughout the Gulf and the evidence is they are in need of top-to-bottom reform,” said Bill Reilly, a former head of the Environmental Protection Agency and co-chairman of the White House Oil Spill Commission.

For more of this story by Ayesha Rascoe, read here.

What we are blogging…

Peterson Foundation launches OweNo campaign on U.S. debt

While the ads are humorous, the subject is serious. Fictional presidential candidate Hugh Jidette (pronounced huge debt) will soon make a pitch for more debt held by foreign countries in television ads that will be appearing across the country. The tongue-in-cheek spots are actually trying to drive home the consequences of failing to tackle huge debt increases facing the U.S. if lawmakers fail to balance budgets and continue to run deficits.

For Donna Smith’s full post, click here.

From elsewhere…

Wanted: Village doctor. Benefits include sausages

A small German village community left in the lurch after their local doctor retired in September has pulled together to try and attract a new GP — by offering free bread, meat, flowers, haircuts and accommodation. Niko Ringhoff, who runs the butcher’s shop, is offering free meaty lunches and a complimentary sausage-themed feast when the new surgery opens. “Everybody wants to do something to help get a doctor,” he told Reuters. “We all want to give him a warm welcome and make sure he feels at home here. We desperately need a doctor, but it’s difficult to attract one to the countryside.”

For more of this story, read here.

For more stories from our Washington correspondents visit www.reuters.com and stay informed.

Photo Credit: REUTERS/Jim Young (Bernanke)

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