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the latest SECONDARY MARKET Or ig i nat ion Fed Issues Rate Warning The FOMC gives mortgage rate guidance and continues with bond purchase program. s e r v ic i ng By Mark Lieberman, Five Star Institute, Chief Economist D The committee repeated its intention to "keep the target range for the federal funds rate at 0 to 1/4 percent." Freddie Mac Director Bids Adieu Bammann resigned from her post at the end of July. L inda B. Bammann bowed out from Freddie Mac's board of directors at the end of July, the company announced. Bammann joined the board in December 2008 and was most recently re-elected in February by written consent of the Federal Housing Finance Agency, Freddie Mac's conservator. In her time on the board, she chaired the Business and Risk Committee and served as a member on its Compensation Committee. "My time on Freddie Mac's board of directors has been both productive and rewarding," Bammann said. "It has been a privilege to be a part of the important work of Freddie Mac, particularly during such a critical time for the housing market as well as the economy in general. I want to thank my fellow board members and the management team and wish the company well as it continues its important work." Bammann worked as EVP and deputy chief risk officer for JPMorgan Chase from July 2004 until her retirement in January 2005. Before that, she held several positions with Bank One, including EVP and chief risk management officer. She was also a member of Bank One's executive planning group and served as a board member of the Risk Management Association and chairperson of the Loan Syndications and Trading Association. "Linda has been a thoughtful and highly effective leader on Freddie Mac's board of directors during an extremely challenging time for the company," said Freddie Mac Chairman Christopher Lynch. "She joined the board following conservatorship, and her tremendous risk expertise and knowledge of the financial markets have been invaluable to us all. I am enormously grateful to her for her service and wish her continued success in her future endeavors." The M Report | 59 se c on da r y m a r k e t The committee repeated its intention to "keep the target range for the federal funds rate at 0 to 1/4 percent" and said it "currently anticipates that this exceptionally low range for the federal funds rate will be appropriate at least as long as the unemployment rate remains above 6 1/2 percent, inflation between one and two years ahead is projected to be no more than a half percentage point above the committee's 2 percent longer-run goal, and longer-term inflation expectations continue to be well anchored." In a subtle change of language designed to assuage nervous stock investors—who often thoroughly parse each committee comment—the FOMC statement said the committee "reaffirmed its view that a highly accommodative stance of monetary policy will remain appropriate for a considerable time after the asset purchase program ends and the economic recovery strengthens." In its statement following the last meeting on June 19, the committee had used the word "expects" instead of the phrase "reaffirmed its view." The committee statement said George "was concerned that the continued high level of monetary accommodation increased the risks of future economic and financial imbalances and, over time, could cause an increase in long-term inflation expectations." A na ly t ic s espite concerns about rising mortgage rates and low inflation, the Federal Open Market Committee (FOMC) voted to continue its policy of near-zero interest rates and its $85-billionper-month bond-buying program. Along the way, Federal Reserve Chairman Ben Bernanke picked up the vote of St. Louis Fed President James Bullard, who recently joined Kansas City Fed President Esther George in dissenting. George had been the sole "no" vote at the four previous FOMC meetings this year. She joined the board as a voting member in January. The vote to continue its policy was 11-1, with only George voting "no." "Economic activity expanded at a modest pace during the first half of the year," the committee said in the statement issued at the end of the meeting. While repeating earlier language citing "further improvement" in labor market conditions and household spending and business fixed investment, the FOMC warned about the housing market and federal fiscal policy. "The housing sector has been strengthening, but mortgage rates have risen somewhat and fiscal policy is restraining economic growth," the committee said, adding, "[I]nflation has been running below the committee's longer-run objective, but longerterm inflation expectations have remained stable."