More Concern About The Fed’s Independence

Another Fed President has expressed reservations about the Fed’s role in attempting to right the economic ship. Last week (link), I noted that Philadelphia Fed President, Charles Plosser, was uncomfortable with the status quo and today Richmond Fed President Jeffrey Lacker said he had similar concerns.

“Using the Fed’s balance sheet is at times the path of least resistance, because it allows government lending to circumvent the congressional approval process,” Richmond Federal Reserve Bank President Jeffrey Lacker said. 

“This risks entangling the Fed in attempts to influence credit allocation, thereby exposing monetary policy to political pressure,” he told the National Association for Business Economics during a luncheon speech.

His solution is the same as Plosser prescribed. Let the Treasury lend the money and issue bonds that the Fed would purchase to support the effort.

Unfortunately, this is kind of like losing your virginity. Once it’s gone you can only pretend it never happened. The Fed may want to roll back the clock but it isn’t going to happen and there will be a price to be paid.

more: here  

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