· Fed Update – from J Hilsenrath in the WSJ – says that the Aug 10 FOMC meeting was among the most contentious in Bernanke’s history as chairman; at least 7 of the 17 Fed officials were against the decision to reinvest maturing MBS into TSYs or expressed reservations about the plan.  The Journal says that officials at the NY Fed were concerned that ultra-low mortgage rates would cause the Fed portfolio to shrink faster than anticipated (b/c of refinancings) – this in turn would result in a faster than expected contraction in the Fed’s balance sheet.  Fed projections indicated that the balance sheet would fall by 20% through the end of ’11, a contraction that many weren’t comfortable with.  Some officials were uncomfortable w/the move, worrying that it was sending a mixed message to the markets and may wind up doing more harm than good (which it wound up doing).  Bernanke's comments this Fri @ Jackson Hole event (10amET) increasingly key highlight of the week.  (WSJ)