U.S. News

Economic Fix? Consumers, Fed Are At Odds

What's the fastest way out of the recession?

A.  Ease up credit.

B.  Tighten credit.

C.  Do both.

Brian Battle of Performance Trust Capital Partners says that the answer seems to be "C," with the Federal Reserve and the consumer working at cross-purposes as they attempt to get back to normal.

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"The Fed's opinion, and the government's opinion, is that we need to make credit more affordable," Battle told CNBC.  "What should make your hair stand on end is when (Federal Reserve Chairman Ben) Bernanke, in his institutional way, says, 'We will invest in the long bonds in substantial quantities.'"

(To hear Battle's full interview, watch the accompanying video.)

Battle cited Oppenheimer's Meredith Whitney for recognizing that consumer attitudes are quite opposite.

"They have a liquidity problem, a solvency problem, and they're peeling back," he said. "They're trying to pay down debt, and get smaller."

The Fed is moving in the wrong direction, he said.

"The Fed's probably going to fail if all they're going to try and do is lower the cost of money," he said.

There is an important element of recovery that no one seems to recognize, according to Battle.

"We need to figure out ways to make the economy bigger to support the debt we have," he said. "We can't borrow our way out of this recession. We need to make the economy bigger."

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