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Jon Hilsenrath of the Wall Street Journal apparently got a detailed briefing about the most recent meeting of the Federal Reserve, and he reports that there was a considerable amount of dissension about even the puny action they ended up taking. The Fed’s technical staff had told them that their portfolio of mortgage-backed securities “was about to begin shrinking much more rapidly than anticipated,” which would likely have a contractionary effect and should have rung alarm bells given the current parlous state of the economy. But Ben Bernanke’s proposal to offset this enough merely to keep the Fed’s balance sheet stable — not shrinking and not growing — met with a fair amount of resistance:

Fed governor Kevin Warsh […] worried that a decision to reinvest mortgage proceeds into Treasurys would confuse investors and lead many to believe the Fed was paving the way to resume major purchases before it had decided to do so….Richard Fisher, president of the Dallas Fed, and others expressed a concern that Fed moves might be ineffective, arguing that businesses weren’t using already ample, cheap credit to fund investments because they were uncertain about many other problems, including government deficits and new financial regulations.

Narayana Kocherlakota, president of the Minneapolis Fed, argued that a large part of today’s unemployment problem is caused by issues the Fed can’t solve, such as the mismatch between the skills of jobless workers and the skills that employers wanted….The president of the Philadelphia Fed, Charles Plosser, who has had misgivings before about Mr. Bernanke’s initiatives, deemed the latest move premature because, though the Fed was lowering 2010 growth estimates, it wasn’t significantly ramping down its estimates for growth in 2011 and beyond. Two other frequent dissenters, Thomas Hoenig of Kansas City, and Jeffrey Lacker of Richmond, Va., also objected. Fed governor Betsy Duke, a former commercial banker, also expressed reservations, according to participants.

This doesn’t bode well. If Hilsenrath is right, it means that there are no more than two or three Fed governors who are currently in favor of more aggressive action as long as the economy doesn’t go completely off the cliff. For the time being, then, we have a Fed that’s plainly not going to do anything expansionary on the monetary side and a Republican Party that’s hellbent on keeping anything from being done on the fiscal side. Lost decade, here we come.

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