fed policy

New Paper: Would a Stricter Fed Policy and Financial Regulation Have Averted the Financial Crisis?

Many commentators have argued that if the Federal Reserve had followed a stricter monetary policy earlier this decade when the housing bubble was forming, and if Congress had not deregulated banking but had imposed tighter financial standards, the housing boom and bust—and the subsequent financial crisis and recession—would have been averted.

Tough Words

In the Wall Street Journal, Mary Anastasia O’Grady got Dallas Fed president Richard Fisher to go on the record about current Fed policy. He talks tough about inflation. “Throughout history, what the political class has done is they have turned to the central bank to print their way out of an unfunded liability. We can’t let that happen.”

The Fed Is Now Scared

Bloomberg News (March 25, 2009) reported a speech by San Francisco Fed president Janet Yellen in which she called for authority for the central bank to issue its own debt. The request must have most people perplexed, especially since her rationale was delivered in Fed-speak. “Issuing such debt would reduce the volume of reserves in the financial system and push up the funds rate without shrinking the total size of our balance sheet,” Yellen said.

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