FOMC for Dummies (or at least, Non-Economists)

There has been a lot of confusion over the last 3 days about what exactly the FOMC – the Fed – did last Friday. It is a colossal oversimplification to say they "lowered interest rates", because in fact all they did was lower the Discount Rate, or the interest rate banks have to pay to the Fed if they are in such dire straits that they can't get money anywhere else. They have also been doing a poorly understood thing called "injecting liquidity," a fancy name for buying and/or making loans against certain kinds of bonds held by banks so that those banks will have more money for things like writing mortgages to Joe and Jane Average.

So I had been prepared this morning to write a somewhat lengthy post on "Who is the Fed and What do they Do?" But it turns out that smarter people than me have already done so. Here at the Fed's website you will find an outline of how they control monetary policy and as a bonus, consumer information. If you would rather start at a simpler level, the Fed has you covered there too, with their Federal Reserve for Kids page, which links to a fabulous site, Fed 101.

Two more helpful things are Econ Ed Link's lesson based on recent Fed minutes and this old lecture by Mr. Bernanke on how monetary policy and stock prices are linked.

Now, if your mind hasn't been rendered numb by econo-speak, here's American debt could be a danger, missed mortgage warning signs, home ownership nightmare, the CSM with the best article on ending homelessness I have seen in ages, and last but not least, debt, spending, housing, and the economy.