Excerpt from: CREDO Action
Will the Federal Reserve pick economic growth on Main Street, or Wall Street profits? The answer may be up to us.
Wall Street is leaning hard on the Federal Reserve to raise interest rates, which would help banks pad their bottom lines by allowing them to charge more to lend money. And just a few days ago, Federal Reserve Chair Janet Yellen admitted the Fed was anticipating raising rates in September, even though it would increase the cost of student loans, mortgages, and car loans.1,2
Raising rates would also slow the economy at a time when wages are still flat and unemployment, especially for African-American and Latino workers, is still painfully high.3 That’s why we’re teaming up with the Center for Popular Democracy and progressive allies to bring the voices of everyday Americans directly to the Fed and demand rates stay low until the recovery reaches all Americans.
Add your name now, and your signature will be delivered along with hundreds of thousands of others to the Federal Reserve board chairs on August 27th at their annual meeting in Jackson Hole. We’ll deliver the message loud and clear: Low rates help Main Street, higher rates pad Wall Street profits, and the Federal Reserve needs to make the right call.
The Federal Reserve is supposed to have a dual mandate: maintain full employment, and fight inflation. In addition to regulating the banking system and serving as a lender of last resort, it regulates the supply of money in our economy. The Fed’s primary tool for balancing its two goals is the federal funds rate, which is the rate which banks can borrow from each other overnight. When money is “cheap” – when banks can borrow overnight at low rates – the economy grows, but often so does the risk of inflation.4
The bad news for all of us is that big banks are over-represented in the Federal Reserve’s decision-making, turning fighting inflation into the top priority.5,6 Big banks that hold lots of assets don’t want those assets to lose value due to inflation, so they demand higher interest rates to reduce the money supply. They also make more money when interest rates are high, because there is more wiggle room between the interest rates they charge consumers and what they have to pay to borrow.7 Instead of standing with struggling families to create jobs and raise wages, the Federal Reserve has been hijacked to serve the needs of banks.
After the 2008 crash, the Federal Reserve did everything in its power to keep interest rates low in order to stimulate the economy, and it deserves credit for preventing Republicans’ later job-killing austerity cuts from throwing us back into recession.8 But all that good work could be undone. Now is not the time to put the brakes on the economy.
While many claim the Federal Reserve is “apolitical,” the truth is that most central banks are political actors – on behalf of Wall Street, not Main Street. It is up to us to make our voices heard.
- Go to the below site and petition to the Federal Reserve
- “Don’t raise interest rates while many Americans are still struggling. Working families haven’t made a full economic recovery and now is not the time to declare victory.”
Thank you for speaking out,
Murshed Zaheed, Deputy Political Director
CREDO Action from Working Assets
Jon Hilsenrath and Ben Leubsdorf, “Fed Preps Careful Path for Rate Hike,” Wall Street Journal, July 30, 2015.
Patrick Gillespie, “Fed rate hike: speed and size matter more than the start,” CNN.com, April 13, 2015.
Alyssa Davis, “Young Black High School Grads Face Astonishing Underemployment,” Economic Policy Institute, June 8, 2015.
John Schoen, “How does the Fed raise interest rates?” CNBC, April 10, 2015.
“Federal Reserve System Structure and Governance: A Balance of Power,” Federal Reserve Bank of Philadelphia, 2009.
Mike Konzcal, “Why Liberals Should Join Conservatives’ Fed-Bashing Fun,” The New Republic, September 20, 2011.
Dakin Campbell, “Banks Want Higher Interest Rates,” Bloomberg, November 14, 2013.
Schoen, “How does the Fed raise interest rates?”
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