The Fed has “stretched beyond reason”
The Fed has stretched beyond reason, Merk Senior Economic Advisor William Poole tells Bloomberg:
“I don’t think independent can mean the Fed can do whatever it wants under any circumstance,” Poole, a senior economic adviser to Palo Alto, California-based Merk Investments LLC, said in an interview today on Bloomberg Radio. “The Fed has chosen to make loans to certain firms and not others.”
Traditionally, central banks “deal in government securities,” and control “overall liquidity” and “overall interest rates,” Poole said. The Fed is “embroiled in fundamentally political questions,” he said.
…The central bank “has not made loans of this sort since the Great Depression,” Poole said. “The Federal Reserve has responded very aggressively to this crisis we are living through” and “has doubled its balance sheet.”
…”It’s important that the Fed be independent on monetary policy, but I worry about what independence might mean in other contexts,” Poole said. “The Fed, it seems to me, has stretched beyond reason its authority to make loans to the private sector, such as the MBS (mortgage-backed securities) purchase program, the lending on commercial paper from large corporations, the bailouts.”
Listen to the full William Poole interview:
(source: Bloomberg)
