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The Federal Reserve Board was the unanimous choice for Story of the Day as Chairman Benjamin Bernanke announced that short-term interest rates would be set as low as they could go. The Fed would charge banks an annual rate of less than 0.25%, the cheapest money it has ever offered. All three newscasts led with the alarm signal of how shaky the economy has become.

"This recession is not a typical recession and so the Fed's traditional response--cutting rates--is actually having very little effect," warned CNBC's Trish Regan on NBC. So the headline news that short term interest rates were being cut turned out to be less important than the second announcement. "The Fed is going on a buying spree," Regan declared, pledging in excess of $2tr to relieve banks of shaky mortgages, auto loans and credit card debt in order to encourage them not to hoard their capital. "The economy will not improve until interest rates fall for consumers as well," ABC's Betsy Stark predicted, and everyone knows credit cards and home mortgages "are nowhere near zero."

"Economic shock and awe," ABC's Stark called it, reminding us of cruise missiles. CNBC economist Steve Liesman and CBS' Anthony Mason came up with ballistic metaphors to describe the difference between lowering rates and buying bad debts. "With no silver bullet for the economy, the Fed fired a shotgun blast," was how Mason put it. "It has decided to put down the pea shooter and pick up the elephant gun," declared Liesman. On ABC, anchor Charles Gibson interviewed Liz Ann Sonders, strategist at the Charles Schwab brokerage firm. She used the technical term for running the printing presses to try to inflate your way out of trouble: "Quantitative easing…pouring reserves into the financial system." Sonders chose herding for her figure of speech. "It is almost like a cattle prod. They are doing everything they can to prod lending."

CBS' Mark Strassmann offered an example from Bank of America's credit cards to illustrate how commercial banks undercut the Federal Reserve's easing efforts. He used Miriam Majors, a nurse in rural Tennessee, to show how the "downward spiral" of consumer credit works. When one credit card contracted her line of credit, her credit rating score was reduced, which made her card's interest rate skyrocket from 8% to 28%, which made her cancel her bank plastic and switch to her local credit union. Strassmann found one estimate that such a spiral will make $2tr-or-so, some 40% of consumer credit, unavailable by 2010.

Andrew Tyndall 12/17/08 9:07:13 pm

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