Financial Dispatch: Fed says economic activity has ‘picked up’

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Andrew Torgan
CNN Financial News Producer

The Fed today kept interest rates near zero and said the economy is improving. But the central bank also cautioned that ongoing job losses could dampen any economic recovery.

At the conclusion of its two-day meeting, the Fed said in a statement that the government's stimulus and economic rescue actions have helped to stabilize the financial markets, which will help generate economic growth in the future.

In addition, Ben Bernanke & Co. said consumer spending is stabilizing, but that rampant job losses and tight credit have dampened overall household consumption. The Fed also noted recent commodity price increases but said it saw little threat of inflation in the near term.

As a result, policymakers voted to keep the federal funds rate - a key overnight lending rate that guides various consumer and business loans - at a target range of zero to 0.25%. Rates have been at that level since December.

House approves jobless benefits extension

The House approved a bill late Tuesday that could extend jobless benefits to more than 1 million people for an additional 13 weeks.

The bill extends benefits for those living in the 27 states with jobless rates higher than 8.5%, as well as the District of Columbia and Puerto Rico. The legislation now moves to the Senate, where the Democratic leadership has said they will try to address the issue soon. A bill has yet to be introduced.

The national unemployment rate hit 9.7% in August, the highest level in 26 years.

Big banks reduce overdraft fees

Bank of America and JPMorgan Chase say they will reduce overdraft fees and overhaul checking account options amid a backlash over banks' policies on overspending.

Overdraft fees reap banks billions of dollars per year. And as financial system reform remains in national focus, consumers and lawmakers alike have called for banks to revamp their penalties.

Beginning Oct. 19, Bank of America says it will allow customers to opt out of the ability to outspend their accounts, and it will no longer charge fees for more than four items per day or on overdrawn balances of less than $10.

In June, the bank will limit the number of times in a year consumers can overdraw their accounts using debit cards in stores, and new customers will be able to opt out of overdrafts when they open their accounts.

JPMorgan Chase said it will eliminate overdraft fees for debit cards unless customers opt in, and it will cut the maximum amount of overdrafts per day to three from six. It will no longer charge for overdrawn balances of less than $5. Chase customers are already prohibited from withdrawing more cash from an ATM than they have available in their account.

Plans for consumer shield pared back

Financial consumers would have fewer protections than originally envisioned under a draft of a bill being circulated on Capitol Hill.

The latest proposal for a Consumer Financial Protection Agency would no longer require financial institutions to offer a “plain vanilla” version of its products, such as a basic 30-year fixed rate mortgage. That would free lenders to concentrate on selling more sophisticated and expensive products.

The changes were proposed in a memo sent to Democratic members of the House Financial Services Committee late Tuesday by its chairman, Barney Frank.

The financial crisis sparked the idea for the agency, which would help make financial products safer for consumers. Advocates say such an agency could have prevented the subprime mortgage crisis and the resulting financial meltdown.

Same 4-bedroom house… wildly different prices

Say that you’re a mid-level executive living in Grayling, MI, which is known as the “Canoe Capital of the World.”

You live in a 2,200-square-foot, 4-bedroom, 2-1/2 bath home that is now valued at about $123,000 – due to the fact that Grayling is the most affordable housing market in the nation.

One day you get a phone call. You've been offered a job that pays twice as much out in Southern California! You decide to settle in La Jolla - a seaside resort near San Diego.

Now remember that your current house is worth $123,000, and you’d like to move into something similar. So at the risk of sounding like an infomercial: “Now how much would you expect to pay?”

What if I told you that you’re looking at a cool $2.1 million?

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