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The Fed's policy manual

The White House instructs its staff in "deterring" protestors. And the Fed...?

"...A White House manual gives presidential advance staffers extensive instructions in the art of 'deterring potential protestors' from President Bush's public appearances around the country..."
- Washington Post, Aug. 22, 2007

Federal Reserve System
Public Relations Policy Manual
Top Secret
Updated: August 30, 2007
Includes appendix, "Protestor Management 101"


THIS POLICY MANUAL, which applies to the board members of the Federal Reserve System and Federal Reserve Bank presidents, has been updated to reflect potentialities which may arise given the slight increase in volatility in the equity and credit markets of late, and given the recent weakness in housing, none of which is our fault as we all know.

   As in prior manuals, the information contained herein is designed to ensure that that Americans maintain complete confidence in the Federal Reserve System regardless of our actual capabilities. As we all know, these jobs are simply too good to lose.

Section I: Instilling confidence: Speak opaquely and carry a big cigar
A). Federal Reserve board members and bank presidents should consider employing a cigar as a prop during formal presentations. This will remind older audience members of the venerable Fed chairman, Paul Volker, and give the impression that today's Fed "means business."

Warning: Smoking is not allowed in U.S. government buildings.

B). For those uncomfortable with tobacco and/or unable to find a suitable plastic cigar, remember that obfuscation is a time-honored Fed practice, and one particularly respected by today's news media. For those with a tendency to speak forthrightly, consider editing your prepared remarks by omitting the periods.

Tip: Aim to put the "bully" in "bully pulpit".

Section II: Situational control
A). Non-governmental venues: The key to a successful speaking engagement is to prevent uninvited guests from taking the crowd "off message" with displays contrary to Fed policy.

   For example, a protestor hoisting a placard reading, "The Fed Chairman told me to get an ARM!" could prevent the audience from fully appreciating the Fed's assurances of home price stability on that particular day. Likewise, groups of hedge fund mangers wearing t-shirts emblazoned with "Cut interest rates now!" could imply that Fed is subject to influence by Wall Street, or is overly concerned with the Street's financial wellbeing, which of course we are not, not, not.

   While it is possible to silence a protestor with a Taser, unless that individual can be quickly dragged behind a curtain until he/she stops twitching, the recommended approach is to prevent such displays from occurring. When possible, Fed board members and presidents should arrange to have "rally rousers" patrolling the venue, looking for placards tucked under arms or possibly hidden in brief cases.

   Admittedly little can be done about a mutual fund manager who opens his sport coat to reveal a message scrawled on his shirt reading "You call yourself a plunge protection team?!" In such cases, aim for the middle of the body.

Directional White Noise Generator: In extreme cases of audience unrest, it may be appropriate to use the Noise Blaster 3000, developed by the defense department and six teenagers who have hacked into the iPhone. This device, again only to be used in emergency situations, emits a blast that can be directed toward a specific party without affecting others in the area. In addition, the 2007 model propels bits of speeches delivered by former Fed Chairman Alan Greenspan toward the target. In laboratory testing, the device has disabled and then put to sleep a human target at 30 yards.

Warning: Keep a pot of coffee brewing in case this thing misfires.

B). Congressional venues: Obviously it is impossible to control many aspects of congressional interaction, whether in testimony on the chamber floor or during committee room hearings.

   Careful responses, however, can turn even the most disagreeable questions into an opportunity to promote Fed objectives. The following prepared responses may be helpful in such situations.

  1. The "Greenspan preamble:" Honed to perfection by the former Fed chairman, simply talking in monotones on almost any subject for several minutes before answering the question can wear down even the most aggressive inquisitor. In one of his better performances, the former Chairman simply read the box scores of a dozen major league baseball games before answering, "I don't know." Near the end of the preamble, consider tossing out the phrase "and after careful consideration." This approach is almost as effective as the Noise Blaster 3000 (see section II. A.)
  2. Words not to use: Generally limit references to helicopters, buying SUVs and "permanently high plateaus." While it is no longer appropriate to use the word "contained," also avoid the phrase "spreading like the plague."
  3. Suggested responses to specific questions: It has come to our attention that certain questions are increasingly likely to be asked of Federal Reserve representatives.

Presented below are these questions along with suggested responses.

   Congressman: "Over the last several years the Fed has downplayed a lack of savings by Americans while applauding the increase in 'wealth' due to home price appreciation that, arguably, the Fed made possible via easy money policies. Yet a report has just been released that shows low income families are struggling harder than ever to keep housing costs at a manageable portion of their income. Do you have any regrets about years of easy money policies?"

   Fed representative: "Look over there, Lindsay Lohan is out of rehab!"

   Congressman: "The Fed has long argued that financial innovation has been a boon to the economy, and our suggestions of increased oversight of either financial firms or the complex securities they purvey, have been dismissed by the Fed as over reaching and unproductive. Have recent events caused the Fed to rethink this stance."

   Fed representative: "Look, Tiger Woods is signing autographs on the Capitol steps!"

   Congressman: "Over at least the past two decades the Fed has dealt with financial crises by flooding the financial system with liquidity, that while alleviating financial stress over the short term, ultimately led to even greater risk taking and leveraging. Do you think these policies have worked to limit the Fed's options in today's subprime mortgage crisis?"

   Fed representative: "I'm going to be 'Dancing with the Stars!' Don't forget to tune in! We will do whatever it takes to stabilize whatever you want. How 'bout that Barry Bonds..."

Tip: If you have trouble "encouraging" a congressman to throw you a softball question, remind them that you have a printing press almost as big as the oil industry's...

Rob Peebles CFA was formerly managing editor of the excellent Prudent Bear website published by David W.Tice & Associates LLC.

See the full archive of Rob Peebles articles.

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