On the stock market surge after the Federal Reserve’s announcement that it would keep interest rates low:
That late-day rally that we saw probably started around 3:00, when the word went out that the president would not address the country. There was cheering, hats thrown in the air, general irrational exuberance. …
The real story is what happened around 2:00. The man who really runs America, the chairman of the Federal Reserve, said something extremely unusual. He said: For two years I’m going to keep interest rates low. Normally, the chairman of the Fed will say words like “indefinitely,” or “for a while.” They’ll use obscure words. But he was extremely specific.
This is a contrast from his predecessor, Alan Greenspan, who spoke in language that was so opaque and obscure you’d think you were listening to an extinct Himalayan dialect.
But Bernanke said two years, and that of course reassured people at a time when there is uncertainty about health-care costs, about taxes and regulations, all of which incidentally are caused by the administration and the government. He was extremely clear, extremely specific.
Now, there is a downside because one of the reasons that we are where we are is a long period of artificially low interest rates [that] created a bubble. So this could help to prolong the bubble.
The way the committee is structured, you only need one crossover. It’s 6-6. If one [committee member] crosses over [to the other side], it [the committee's bill] goes to a vote in the Senate and the House. So you can have a lot of hardliners. Always the question is, is there one guy or a woman who could be a flip? And that could be a Baucus. So I think it’s encouraging.