The most vocal opponent of QE3, Richmond Fed President Lacker, went so far as to issue a press release on the website of the Richmond Federal Reserve explaining why he opposed the monetary plan approved by his fellow governors on the FOMC. It seems like sour grapes to use a government website to make a point about his position–one that most people who care about the Fed already understand.
At the core of the statement was Lacker's contention that the Fed had taken a place in the financial world of the United States well beyond its true franchise. In his mind, Ben Bernanke is competing with Treasury Secretary Geithner for who will have the most power to control and resurrect the American economy.
The statement said:
I dissented because I opposed additional asset purchases at this time. Further monetary stimulus now is unlikely to result in a discernible improvement in growth, but if it does, it's also likely to cause an unwanted increase in inflation
I also dissented because I disagreed with the characterization of the time period over which the stance of monetary policy would be highly accommodative and the federal funds rate would be exceptionally low. I believe that such an implied commitment to provide stimulus beyond the point at which the recovery strengthens and growth increases would be inconsistent with a balanced approach to the FOMC's price stability and maximum employment mandates.
Finally, I strongly opposed purchasing additional agency mortgage-backed securities. These purchases are intended to reduce borrowing rates for conforming home mortgages. Such purchases, as compared to purchases of an equivalent amount of U.S. Treasury securities, distort investment allocations and raise interest rates for other borrowers. Channeling the flow of credit to particular economic sectors is an inappropriate role for the Federal Reserve. As stated in the Joint Statement of the Department of Treasury and the Federal Reserve on March 23, 2009, "Government decisions to influence the allocation of credit are the province of the fiscal authorities
Those are a lot of reasons, which boil down to the fact that the FOMC decision is both midguided and one which will not work
Douglas A. McIntyre
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