Which road to take? Fed takes both

WASHINGTON, March 11 (UPI) -- The U.S. Federal Reserve has tried several economic fixes in recent weeks, hoping to find a middle road, by taking two roads at once, analysts said Tuesday.

Bank write-offs may be the quick, painful and necessary step to salvage a slumping economy, financial analysts told the Christian Science Monitor Tuesday.

But, economic fixes can be fast or slow, analysts said. Write-offs provide an immediate correction to overvalued loans. On the other hand, when the U.S. Federal Reserve reduces key rates, as they have done recently, they allow adjustable mortgages to remain steady. They also increase the gap between what lenders pay for securities and what they reap from providing loans.

The Fed is working solutions at both ends of the spectrum, providing for interest rate reductions -- helping banks and, eventually, borrowers -- and urging banks to mark down principal, the report said.

"A reduction in principal may increase the expected payoff by reducing the risk of default and foreclosure," Bernanke said recently.

"The logic of finding a middle way is obvious," Nouriel Roubini, an economist at New York University said recently. But "finding the right and appropriate 'middle way' ... is very hard."