Economy Watch: FOMC Warns About Foolish Policy, Debates QE3

By Dees Stribling, Contributing Editor

The Federal Open Market Committee released the minutes of its Sept. 17-18 meeting on Wednesday, and it was clear the central bankers saw one thing coming. “… questions were raised about the effects on the housing sector and on the broader economy of the tightening in financial conditions in recent months, as well as about the considerable risks surrounding fiscal policy,” the minutes said. In other words, the Fed thought it likely that obstinance, pigheadedness and all-around foolishness in Congress would at the very least temporarily damage in the economy, as it did in 2011.

The minutes also hinted—because they would never come out and say such a thing —that there was considerable argument among the members about the future of the Fed’s bond-buying program, which currently amounts to a stimulus of $85 billion a month (QE3). When central bankers argue among themselves, it’s “debate.” According to the minutes, “in their discussion of the path for monetary policy, participants debated the advantages and disadvantages of reducing the pace of the Committee’s asset purchases at this meeting, focusing importantly on whether the conditions presented to the public in June for reducing the pace of asset purchases had yet been met.”

In the end, advocates of the status quo carried the day. Even those who wanted to do some tapering of the bond-buying program only wanted to do a little, the FOMC explained: “Most of the participants leaning toward a downward adjustment in the pace of asset purchases also indicated that they favored a relatively small reduction to signal the Committee’s intention to proceed cautiously.”

Vegas residential sales slow

The Greater Las Vegas Association of Realtors reported on Wednesday that the total number of existing residential units sold dropped in September, both on a monthly basis and an annual basis. The market is worth special attention, because it was a poster child for the housing recession, and is something of a bellwether for the recovery.

For September, the total number of existing local single-family homes, condos and townhomes sold in September was 3,259. That’s down from 3,539 in August and down from 3,298 total sales in September 2012. Compared to August, single-family home sales during September decreased by 9.2 percent, while sales of condos and townhomes decreased by 1.5 percent. Compared to one year ago, single-family home sales were up 0.3 percent, while condo and townhome sales were down 7.3 percent.

On the other hand, GLVAR also reported fewer foreclosures and short sales in the market. In September, 23 percent of all existing home sales were short sales, down from 25 percent in August. Another 7.4 percent of all September sales were REO, down from 8 percent in August. The remaining 69.6 percent of all sales were the traditional type, up from 67 percent in August.

Yellen nominated for Fed Chair

As expected, President Obama nominated Fed Vice Chairman Janet Yellen on Wednesday to succeed Ben Bernanke as head of the central bank. Reaction from Congress, which is somewhat distracted by other matters right now, was muted. No hearings on the nomination have been set yet.

Wall Street seemed to be a little calmer on Wednesday, ending the day mixed instead of significantly down. The Dow Jones Industrial average was up by 26.45 points, or 0.16 percent, while the S&P 500 eked out a 0.06 percent gain. The Nasdaq dropped 0.46 percent.