Rep. Maxine Waters (D-CA) Displays Total Ignorance in Meeting with Federal Reserve Chairman Ben Bernanke

Rep. Maxine Waters (D-CA) displays total ignorance about two key economic concepts during Federal Reserve Chairman Ben Bernanke's meeting with House Committee on Financial Services.

I liked Rep. Maxine Waters (D-CA) for her tenacity and her spirit, but I must say, I was taken aback by her complete ignorance during a meeting of the House Committee on Financial Services during which she resoundingly proved she has no clue about economics in any sense of the word. She questioned Federal Reserve Chairman Ben Bernanke about why he was raising the federal funds rate, which he clearly stated he  was not raising. Her confusion stemmed from a misunderstanding of two completely different economic concepts -- federal funds rate and the discount rate, the latter of which Bernanke said was actually going up.

To be totally honest, most people don't have a clue what those two concepts mean, but if you sit on the House Finance Committee for about 20 years, you ought to know what that means. She should also understand key economic concepts that govern the Federal Reserve.

Ms. Waters' position was that Bernanke's "suggestion" to raise the federal funds rate would cause mortgage rates to rise, which is correct, but he isn't raising the federal funds rate. The discount rate has no bearing on mortgage or any consumer borrowing rates. It is the rate the Federal Reserve charges banks to borrow money directly from the Fed. The federal funds rate is what banks charge one another for overnight loans. This has a direct effect on borrowing rates for consumers.

You would think that Ms. Waters, at the very least, know the difference between the two. She probably will come out of this unscathed for the moment because all eyes are on the health care reform summit being held by President Obama. The reality is if she can't grasp two key economic concepts that play a role in the committee on which she sits, then one has to wonder how effective she has been for her constituents.

Here's a video of Maxine Waters' argument with Ben Bernanke.


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