Fed's Actions: A Devil's Bargain?

When economic times were good, then-Fed Chairman Alan Greenspan was like a god. Times haven’t been so good for a long time, and now the Fed is being compared to the devil.

In a rare question and answer session with journalists, Fed Chairman Ben Bernanke defended the Fed’s policy of keeping interest rates low by pumping money into longer-term U.S. Treasuries, driving yields lower.

In his latest web post, Bill Gross, manager of Pimco’s $241 billion dollar bond mutual fund, asks if “record corporate profits are a fair price for America’s soul?”

His answer: “a devil’s bargain more than likely.” He accuses the Fed of “taking money from one class of asset holders and giving it to another.”

Bernanke hardly sounded devilish in his comments to reporters. While he didn’t address Gross’s comparison directly, he defended the Fed’s policy as necessary to stimulate the economy and “put people back to work.” 

And while he said it’s likely to be “several years” before employment returns to normal, he said there were signs companies would soon start hiring again. Friday morning could offer more evidence of an improving jobs market, with the government releasing January's nonfarm payroll report, which is expected to show an increase of about 150,000 jobs.