Contentious times for Bernanke and the Fed

By CNNMoney.com staff


NEW YORK (CNNMoney.com) -- Divisions among the 17 key Federal Reserve officials about how to deal with the economic situation reached a peak at their meeting earlier this month, according to a published report Tuesday.

At the meeting, seven officials expressed disagreement with all or part of Chairman Ben Bernanke's plan to change the way the Fed manages its $2.05 trillion in mortgage debt and U.S. Treasuries, The Wall Street Journal said, citing interviews with meeting participants

Ultimately, Bernanke prevailed at the meeting in getting policy makers to approve reinvesting maturing securities in order to maintain the current portfolio, which is at high levels in an effort to bolster the flagging economy.

The Journal said the disagreements at the meeting included concern that Fed officials were sending a message that the economy was worse than it really was. The paper also said one official was concerned that banks were not acting to extend credit even with the large amount of money already in the system.

The final vote on the policy was 9-1, with only Kansas City Federal Reserve Bank Thomas Hoenig voting against. Only 10 of the 17 officials at the meeting were eligible to vote, and some of those expressing reservations voted in favor of the policy, according to the Journal.

Bernanke is expected to unveil more details about how the Fed can manage the economy in the current environment in a speech at the Kansas City Fed symposium in Jackson Hole, Wyo., on Friday. To top of page

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