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Opinion

Bush for Fed treatment?

As November's US presidential election draws near, interest grows in how the Federal Reserve is going to balance managing the economy and managing candidate's demands.

After all, Alan Greenspan is the same Fed chairman who cost Bush senior the election in 1992, isn't he? And surely the Fed would never raise rates in an election year?

Well, Mickey Levy, Bank of America's chief economist, has research that disproves that notion. Looking at the elections since 1960 he finds that the Fed has raised rates in six of the 11 and reduced them in five.

"With only one exception, the Fed has tended to raise and lower rates in response to economic and inflation conditions in election years in a similar manner as during off-election years," writes Levy in his report, The Fed's Reserve.

The exception was 1972 when chairman Arthur Burns didn't raise rates as much as conditions required. There is, says Levy, evidence to point to complicity between Burns and Nixon to aid Nixon in his successful campaign.

Aside from that, the Fed acted as independently as was intended, regardless of whose appointee was in office.

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