http://www.nationaljournal.com/econo...ryTiles_medium
The Fed's ongoing quest to drive down interest rates targets both goals. By keeping rates low, Bernanke makes it cheaper for borrowers to take out loans. And to convince lenders to take a risk on those loans, the Fed has bought up massive quantities of Treasury bonds—considered the ultimate safe investment among investors—in an effort to drive down the rate at which those bonds pay off to private investors. The hope is that investors, unsatisfied at the low rate of return they get back from the federal government, will instead put their money into the private sector.
That's where Congress is so damaging to Bernanke's efforts. By precipitating one crisis after another, lawmakers are sending investors running back to the type of investments that keep their money safe but do precious little in the way of economic stimulus.
If Congress wanted to spook lenders, it could hardly pick a better method than flirting with default. "It would be the opposite of what the Fed's wanted to do," says Stuart Hoffman, chief economist at PNC Financial Services. "It basically says something has happened outside the Fed's control that could shock the economy into recession."
For Bernanke, the current debt-ceiling standoff may be all the more infuriating because he's seen it, and its destructive effects, play out before. When the country last brushed up against the debt ceiling in the summer of 2011, investors flocked to Treasury bonds, looking for a safe place to park their assets while they waited to see if Congress was going to unleash economic chaos