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The Federal Open Market Committee faces a perplexing deliberation over the next 36 hours. They have backed themselves into the corner and either must again cut interest rates just after last week's emergency 3/4 percent cut to maintain the market's momentum, or they must act prudently to hold the line disappointing the market and suffer the criticism of destabilizing the markets. Either way its looks like a lose-lose proposition, because the Fed can hardly be seen as acting on the dictates of Wall Street nor be seen as not acting prudently to aid the economy when benchmark Treasury rates already support a substantially lower Federal Funds rate.

There is of course an alternative course of action. They could just ask the President to issue an executive order to cap credit card interest rates at 12-15% to end the choking-off rates bank issuers are charging to make up for bad sub-prime loans. This would have a far greater immediate and multiplier impact on consumer spending than any further rate cut ever could and would keep Treasuries attractive as an investment to finance US deficits. At the same time it would keep some gunpowder dry, if as they claim, the US is not already in a Recession. Furthermore it would align US rates and monetary policy more with those of our long term allies.

Not doing so is akin to sanctioning usury and taking a big risk of exacerbating greater consumer default, this time on credit cards, compounding the problems the financial system already faces. In fact there's only one reason the Fed would not opt instead to do this: the Fed is blatantly acting on the dictates of its banking brethren who are intent on gouging US consumers to make up for their losses. Indeed implicit evidence of this already exists by the case of last week's .75 basis point cut that didn't effect US mortgage rates.

This author calls on the GAO to investigate price collusion between the banks and the Fed? And while they're at it, they should investigate the Government's reporting of economic data beginning with CPI, GDP and Durable Goods. It wouldn't be surprising to learn that revisions to correct earlier economic data announcements were far less necessary meaning that they have been manipulated for political ends.