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Federal Reserve Bank Prez Blames Congress For Lagging Economy

Trillions Of Dollars In Private Money Not Being Used To Create New Jobs
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(credit: KTVT/KTXA) Jack Fink
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DALLAS (CBS 11 NEWS) – While the Texas economy keeps booming, experts say the rest of the nation still lags far behind.

On Tuesday night in Dallas, the President and CEO of the Dallas Federal Reserve Bank, Richard Fisher, made a speech that’s making national headlines, about who he blames for the still sluggish economy.

Fisher told the Dallas and Fort Worth chapters of the Financial Executives International, “For far too long, the greatest obstacle to our nation’s prosperity, has resided in this building right here: the Congress of the United States.”

Fisher said Congress has repeatedly failed to develop a tax or fiscal policy that would boost the economy.

He pointed out an editorial in the Financial Times this week that concluded — “Fiscal policy is still not an ally of U.S. growth,” and then added, “Fiscal policy is not only not an ally of U.S. growth, it is its enemy.”

In a one-on-one interview Wednesday, Fisher explained why he’s speaking out about Congress.  “These are people who can’t even agree on a budget. They bicker and I just believe it’s time to be frank about this.”

To expand, businesses need to borrow money and Fisher says banks have plenty of money to give. The problem is businesses aren’t taking out loans, and as a result the banks have been essentially parking piles and piles of cash at the Federal Reserve.

Before the financial crisis began in 2008, Fisher said banks kept anywhere between $600 and $900 million in reserves at the Dallas Federal Reserve Bank. Now, that amount has skyrocketed to more than $41 billion.

Nationally, banks kept a total of $43 billion in reserves before the financial crisis began. Now, it’s up to $2.5 trillion.

Fisher said, “The point is, there’s a great deal of money sitting on the sidelines.  It’s not being used to put the American people back to work.  It’s not because bankers aren’t good people. They’re very good people. They want to lend money to good credit-worthy customers. It’s just that those customers are reluctant to borrow in order to create new jobs because they don’t know what their taxes are going to be next year, the responsibility of the Congress. They don’t know what federal spending patterns are going to be, the responsibility of Congress, and they feel way over-regulated and hampered by those regulations.”

When asked if President Obama bears any responsibility to work with the Congress to create the economic policies to encourage job growth, Fisher told CBS 11’s Jack Fink, “I think they have to work together.  My disappointment has been that Congress is so caught up in partisan bickering and have not been able to figure out how to work together with the President, whether you agree with the President or not, the two parties are responsible for setting the pace and both have disappointed.”

Fisher calls Texas a job-creating machine and says the Lone Star State has added many jobs on every pay level.

Between 2000 and 2012, Fisher says Texas saw the number of jobs with the highest wages grow by 30.3-percent. The rest of the nation without Texas saw those jobs grow by just 9.9-percent.

When it comes to jobs with upper-middle wages, Texas grew by 31-percent during that same period. The rest of the nation saw those jobs grow by just 0.9-percent.

According to Fisher, a big trouble spot for the nation can be seen in jobs with lower to middle wages.

While that number grew by 10.4-percent in Texas from 2000-2012, the number of jobs for the rest of the country without Texas fell by 6.9-percent.

job growth chart

“Our most vital organ of our nation’s economy, the middle-income worker is being eviscerated,” Fisher said.

As for the lowest-paying jobs, Texas saw its number grow by 18.6-percent during that time. In the rest of the nation without Texas, the lowest paying jobs grew by 9.7-percent.

Fisher credits Texas’ pro-growth policies and fair regulatory climate.  “We should be proud here in Texas.  We lead the way.  It’s the rest of the country I worry about.”

Follow Jack on Twitter:  @cbs11jack

(©2014 CBS Local Media, a division of CBS Radio Inc. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed.)

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