Economics and politics of the Fed fund rate

The most recent changes in the Federal Funds rate by the Federal Reserve demonstrate clearly that Alan Greenspan screwed up with his long series of rate increases that started in February 2005. The timing of that start is significant because it is only to months after Bush was reelected in part on the basis of no recession in 12004. It is clear that historically every time there is a recession during a Presidential election year, the Party of the incumbent President is removed and replaced by the candidate of the other party.

Greenspan, fully aware of the effects of the economy on Presidential elections, increased the federal funds rate in 2000 (making a Bush election over Gore more likely) and then lowered the Fed funds rate in 2004 so that Bush would be reelected. The evidence is in the timing of fed fund rate changes.

Note the years in blue which are election years, and the years in yellow which are the year after. In 2000 Greenspan was making the economy more difficult in order to defeat the Democrat. In 2004 he was making it better to elect the Republican.

In 2005 Greenspan knew that the low interest rates had created the housing bubble, so he was trying to stop the bubble. The continued into 2006. Greenspan was still trying to correct the problems he had created in 2001 through 2004. In early 2007 CountryWide, the nations' largest mortgage lender, announced in early Spring that the collapse of the housing bubble was causing economic problems. The result was the credit crunch that became obvious to everyone by Summer 2007, but which they thought could be isolated in just the mortgage markets. We now know that was living in a fool's paradise.

Intended federal funds rate 1997 to present

Year	Date	Rate
2008	March 18	2.25
	January 30	3.00
	January 22	3.50
2007	December 11	4.25
	October 31	4.50
	September 18	4.75
2006	June 29	5.25
	May 10	5.00
	March 28	4.75
	January 31	4.50
2005	December 13	4.25
	November 1	4.00
	September 20	3.75
	August 9	3.50
	June 30	3.25
	May 3	3.00
	March 22	2.75
	February 2	2.50
2004	December 14	2.25
	November 10	2.00
	September 21	1.75
	August 10	1.50
	June 30	1.25
2003	June 25	1.00
2002	November 6	1.25
2001	December 11	1.75
	November 6	2.00
	October 2	2.50
	September 17	3.00
	August 21	3.50
	June 27	3.75
	May 15	4.00
	April 18	4.50
	March 20	5.00
	January 31	5.50
	January 3	6.00
2000	May 16	6.50
	March 21	6.00
	February 2	5.75
1999	November 16	5.50
	August 24	5.25
	June 30	5.00
1998	November 17	4.75
	October 15	5.00
	September 29	5.25
1997	March 25	5.50

(Source Federal Reserve.)