[RED DEMOCRATICA] CFR.org Daily Brief, January 29, 2010

 

January 29, 2010 View this newsletter as a web page on CFR's website. EXECUTIVE SUMMARY - U.S. Fed Powers in Question - Toyota Extends Recall to EU and China - China Helps Anti-Piracy in Somalia - Blair Denies Iraq Deal Top of the Agenda: U.S. Fed Powers in Question The U.S. Senate confirmed Federal Reserve Chairman Ben Bernanke for a second term, but congressional opposition to his reappointment (WashPost) will undermine his powers in emerging from the global recession. The Senate voted seventy to thirty to give Bernanke four more years at the helm. But although he won a majority of both Republicans and Democrats, he received more "no" votes that any Fed chairman in history. Congress' criticism of Bernanke--for bailing out financial firms and failing to regulate big banks--will add pressure to the central bank's independence, which is intended to give its leaders a long-term view, especially on setting interest rates. Congress is debating proposals to strip the Fed of its power to regulate banks and to audit the Fed's monetary policy, both of which Bernanke opposes. Bernanke will also face steep opposition to the Fed's eventual decision to raise interest rates, currently hovering near zero. Harsh criticism of Bernanke and the Fed is unlikely to subside (WSJ) and could prompt the Fed to address inflation risks more quickly. The confirmation was a victory for U.S. President Barack Obama but indicates that the Fed has become the object of outrage (NYT) over high unemployment and bank bailouts. Analysis: In a Wall Street Journal op-ed, Allan Meltzer says the Fed's anti-inflation strategy won't work and that it should announce a policy for preventing inflation that reduces the enormous stock of excess reserves. A Financial Times editorial says Bernanke's loss of credibility for failing to predict the crisis is less concerning than the complacency he displayed in a recent lecture, arguing that the Fed's low interest rates in the early 2000s did not contribute to the housing bubble. Background: This CFR Backgrounder examines the debate over reforming the Federal Reserve's role. SOUTH AND CENTRAL ASIA: London's Afghanistan Conference TIME reports that important issues--such as Iran, the inclusion of women in the Afghan delegation, and a timetable for transferring security control from NATO to local forces--went unaddressed at London's one-day conference on Afghanistan. Sri Lanka: Sri Lankan police raided the office (HindustanTimes) of losing presidential candidate General Sarath Fonseka, according to his supporters. AFRICA: China's Anti-Piracy in Somalia China agreed to join the United States, NATO, and the European Union in fighting piracy (BBC) off the coast of Somalia. Nigeria: The United States and Europe urged Nigeria to abide by the constitution in resolving uncertainty over President Umaru Yar'Adua's absence, citing the effects on regional stability http://af.reuters.com/article/topNews/idAFJOE60S0A420100129 (Reuters). AMERICAS: 9/11 Trials Facing mounting pressure from New York politicians, the U.S. Justice Department is exploring alternative sites (NYT) for the trial of Khalid Sheikh Mohammed and four accomplices accused of planning the September 11 attacks. EUROPE: Blair Denies Covert Iraq Deal At Britain's Iraq inquiry, Former British Prime Minister Tony Blair denied striking a "covert" deal (Guardian) with former U.S. President George Bush a year before the 2003 war. France: French prosecutors will appeal (DeutscheWelle) the acquittal of former French Prime Minister Dominique de Villepin, who was accused of engaging in a smear campaign against President Nicolas Sarkozy. PACIFIC RIM: Toyota Recall Japanese carmaker Toyota extended its recall (WSJ) of millions of vehicles suspected of sudden-acceleration problems from the United States to Europe and China. China: At the World Economic Forum in Davos, Switzerland, China reaffirmed (Bloomberg) its economic goals of raising incomes and domestic consumption while reducing reliance on exports and investment. MIDDLE EAST: Hamas-Israel Relations Hamas, which controls the Gaza Strip, says one of its commanders was assassinated (al-Jazeera) by Israeli agents in Dubai. Separately, the Israeli army and security forces are clamping down on local organizers and activists in the West Bank, the New York Times reports. Iran: The U.S. Senate approved legislation (WashPost) allowing President Obama to impose sanctions on Iran's gasoline suppliers to pressure Tehran on its nuclear program.

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