Richmond Fedhead Lacker: Fed Independence at Risk
DEAR JEFFREY LACKER, I LOVE YOU. I mean, at least as much as an anti-Federal Reserve sound money advocate can love a Fedhead.
For a Federal Reserve president, Richmond Fed's Jeffrey Lacker is pretty bold. He's already shown that he isn't afraid of a little dissent and has opposed Big Daddy Bernanke on more than one issue.
And now he's at it again, this time questioning the "independence" of the Fed in the face of unique credit programs it's pulling out of its ever-loving ass to thaw credit in the United States. Reuters reports:
Emergency credit market support from the Federal Reserve has sidestepped Congress and could expose the U.S. central bank to political pressure that hurts its independence, a top Fed policy-maker said on Monday.
"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.
The Fed has cut interest rates to almost zero and more than doubled the size of its balance sheet to around $2 trillion through programs aimed at supporting private lending in a bid to prevent the more-than-year-long recession from getting much worse.
Jeffrey Lacker is officially my favorite Fedhead. Hands down. And while I question the Fed's position in the first place (you know, Constitutionally-speaking), Lacker's remarks today reflect the delicate position the Fed has been in for quite some time. Do they or don't they? A reasonable person might argue that the Fed deserves all the political pressure of any other fake government-based entity - but then there is no organization quite like the Fed, is there?
All snark aside, the Federal Reserve has reached a point where it will have to decide. Either it remains a relatively independent entity (read: private and no more federal than Federal Express, as the Ronpauloids like to say) or it becomes intertwined with the U.S. government, thereby losing the ability to sell us our own debt in exchange for paper. Oh, there's some monetary policy/price stability crap in there somewhere too but we're not too worried about that right now. In case you haven't noticed, the sky is falling.
Lacker has also expressed concerns towards the Fed's pick-and-choose credit easing policy. Apparently that's just more market manipulation than he can take. Fox Business (shush, I Googled it, I don't read it) reports:
Jeffrey Lacker, the president of the Richmond Federal Reserve Bank , said Monday that one reason he is opposed to the Fed's new credit easing policy because it is picking winners and losers in the market. "While some market segments benefit from reduced funding costs, others may actually see their costs rise as credit is diverted to those markets that have been targeted for support," Lacker said in a speech to business economists. Lacker dissented from the Fed's last policy statement in late January. Lacker wants the Fed to expand its monetary base but only though purchases of Treasurys because they are a more "neutral" asset class that would not impact other markets. Lacker said that there may be sound market basis that some credit channels are "frozen," suggesting that targeting credit programs are not needed.I've said it before and I'll say it again: Save us, Jeffrey Lacker! You're our only hope!