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GOP: Fed action a sign of weak economy under Obama

 

The Federal Reserve’s actions Thursday to stimulate the economy emerged as a flashpoint in the 2012 election as Republicans condemned the Fed’s new wave of “quantitative easing” and cited it as evidence that President Barack Obama’s policies have failed.

CNBC's Steve Liesman joins Andrea Mitchell Reports to recap the meeting.

The Federal Reserve board announced Thursday afternoon that it would initiate an open-ended effort to prop up the economy – including about $40 billion in monthly purchases of mortgage-backed securities – until it was satisfied that employment and growth were sufficiently robust.

“The Federal Reserve’s announcement of a third round of quantitative easing is further confirmation that President Obama’s policies have not worked,” said Lanhee Chen, a senior policy adviser to Republican presidential nominee Mitt Romney.

“After four years of stagnant growth, falling incomes, rising costs and persistently high unemployment, the American economy doesn’t need more artificial and ineffective measures. We should be creating wealth, not printing dollars.”

Jonathan Ernst / Reuters

Federal Reserve Chairman Ben Bernanke delivers remarks about a significant shift in the direction of U.S. monetary policy at the Federal Reserve in Washington September 13, 2012.

Republicans simultaneously decried the Fed’s decision as helpful to Obama’s re-election effort, and labeled it a misguided action that would threaten inflation and a weaker dollar in the long-term.

“We have tried very, very hard ... to be nonpartisan and apolitical, to make our decisions entirely based on the economy,” Bernanke said at a press conference explaining “QE3,” the short-hand term for the third wave of quantitative easing, a process undertaken since the 2008 financial crisis to boost the economy.

“We just don't take those factors into account,” the Fed chairman added in response to a question about the political fallout from today’s announcement.

Bernanke was first named the chairman of the Federal Reserve board by President George W. Bush, and was re-nominated for a second term by Obama in 2010. Bernanke’s activist tenure in charge of the Fed, though, has invited criticism from liberals and conservatives alike; he was confirmed by the Senate for a second term by a vote of 70 to 30 – the narrowest margin ever for a Fed chair appointee.

Romney has long been on record as opposing another term for Bernanke when his current term ends in 2014. The nominee has also repeatedly opposed QE3, and his campaign on Thursday characterized the Fed’s actions as “yet another bailout.”

The Republican presidential nominee talks with NBC's David Gregory about his policy stances and his standing in the 2012 race.

"I don't think that easing monetary policy is going to make a significant difference in the job market right now," Romney, the former venture capital executive, said on NBC's Meet the Press this past Sunday. "I think what the nation needs is a change in fiscal policy, a different structure to our economic positions."

Obama, who was campaigning Thursday afternoon in Colorado before returning back to Washington, had not reacted publicly to the Fed’s announcement by mid-afternoon.

The news of the Fed’s unprecedented steps to boost the economy would seem, though, to put the precarious state of the economy squarely back into the center of the 2012 campaign. The past two days had detoured onto topics of foreign policy following an assault on a U.S. diplomatic mission that left the American ambassador to Libya and three others dead.

For Romney, a return to the economy as the issue du jour means a return to an issue of strength for his campaign. The former Massachusetts governor has staked much of his candidacy upon the idea that Obama’s stewardship of the economy was hopelessly flawed and that Romney’s private sector experience made him the best candidate to orchestrate a national turnaround.

To that end, most other Republicans joined Romney in criticizing the Fed.

"I'm disappointed in the Federal Reserve's actions today and truly believe Chairman Bernanke is beginning to do serious damage to the Fed as an institution," said Tennessee Sen. Bob Corker, a prominent member of the Senate Banking Committee. "Open-ended purchases of mortgage-backed securities will politicize the Fed and add substantially to its balance sheet risks, but it will not help our economy's long-term growth prospects."

Even former Alaska Gov. Sarah Palin, the 2008 Republican vice presidential nominee, weighed in.

"This is what happens when big-government centralized planners try to 'plan' our economy," she said. "President Obama is no doubt happy, though, that this latest sugar fix comes 53 days before the election."

But it was unclear, too, whether the minutiae of monetary policy would translate into a potent attack for Romney, especially as the Fed’s action continued to battle the ongoing diplomatic standoffs in Egypt, Yemen and Libya for headlines.