Fed official has doubts about plan

Fed official has doubts about plan

WASHINGTON

A Federal Reserve official with close ties to Chairman Ben Bernanke expressed doubts Monday about whether the Fed’s new $600 billion bond-purchase program would succeed in boosting the economy.

Kevin Warsh, a Fed governor, also warned of “significant risks” associated with the program, including the potential for triggering excessive inflation later on.

The Fed’s program, announced last week, is intended to push interest rates on loans even lower than they are now.

The Fed hopes cheaper loans will spur Americans to borrow and spend more. A stronger economy could, in turn, prompt companies to hire more and invigorate the economy.

But Warsh said he doubted the program will have “significant” or “durable benefits” for the economy. He made the comments in a speech to the annual meeting of the Securities Industry and Financial Markets Association in New York.

Irish banks, bonds hit amid skepticism

DUBLIN

Shares in Ireland’s banks hit record lows, and national borrowing costs reached new euro-era highs Monday as the government presented its latest plans for financial survival to the European Union’s economic commissioner, who has the power to order changes.

Investors are shunning Ireland’s government and bank debt in expectation that the country eventually will require a bailout by the EU and International Monetary Fund, as happened to Greece in May.

The interest rates charged on the treasuries of Ireland, as well as fellow indebted euro-zone members Portugal and Spain, have been rising ever since German Chancellor Angela Merkel last month said she expected any future EU bailouts to come with new rules requiring bondholders to absorb some losses.

Associated Press