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Ernest (Ernie) T. Patrikis is a partner White and Case.  During his 30-year career at the Federal Reserve Bank of New York, Mr. Patrikis served as General Counsel for many[…]

AIG’s former head counsel is crossing his fingers that our economy isn’t headed for a double dip.

Question: What keeps you up at night?

Ernest Patrikis: Nothing keeps me up at night.  I sleep well every night.  If you ask me what I think about when I’m awake, it is I hope we don’t double dip as an economy.  I think that’s one concern that we perk along, we don’t have a fast up and then a down.  We don’t drop down again.  Over the longer term, I hope that the Fed, when it has to and now is certainly not the time, but when it comes time to really increase rates that the Fed does it, that the will is there.  And I look at the Fed and say, there are seven governors, there are two openings now and there probably will be more.  I would suspect that one or two of the present governors could possibly leave.  And that would give President Obama five out of seven, would be his people.  And that has the potential to cause a problem if Chairman Binacci wants to go one way.  The Fed is not a monolithic beast.  The Chairman is a powerful person, it always has been.  But the decisions of the Federal Local Market Committee require a vote of 12.  So, when I talk about interest rates and I read economists say, look at this, look at this, look at this, I say, “Look to see, when you see the first descent at a Federal Open Market Committee meeting on interest rates, then we’ll know we’re on the way.  Someone will be ahead of the curve, maybe too early, but it takes one brave, probably Reserve Bank President to do it, but we should have the spirit to go to the non-inflationary course that we had before.  We all know it’s an issue, it’s no secret, and I have no reason to believe the Fed won’t do it, but I can feel uneasy. 

Recorded on November 9, 2009