Bernanke: The Fed Will Sell Assets If It Has To
Whatever it takes...
The time has finally come for the Fed to let go of the crap assets that it shouldn't have gotten a hold of in the first place. Alright, so Ben Bernanke didn't tell the House Financial Services Committee that the Fed was actually ready to unload anything, only that they'd totally be open to doing so if they had to.
Neil Irwin tells us via WaPo:
The Federal Reserve is open to selling some of the securities now on its books as part of its withdrawal from its unconventional efforts to prop up the economy, Chairman Ben S. Bernanke said Thursday, in a change of tone on how the Fed will execute its exit strategy from crisis-era interventions.
Bernanke, testifying Thursday before the House Financial Services Committee, said that "if necessary," the Fed "has the option of redeeming or selling securities" bought during the crisis. In written testimony to the same committee on Feb. 10, he was more ambiguous, stating that he did not "anticipate that the Federal Reserve will sell any of its security holdings in the near term," at least until after the Fed had begun raising interest rates and the economy had clearly begun a sustainable recovery.
Similarly, Bernanke said Thursday that "restoring the size and composition of the balance sheet to a more normal configuration is a longer-term objective of our policies." Six weeks earlier, he said only that the Fed "may also choose to sell securities in the future when the economic recovery is sufficiently advanced."
For comparative purposes, I remind dear reader that the Fed balance sheet is not that far away.
The AP has the dry video (blah blah blah inflationary pressures blah blah blah interest on reserves):
So, basically, Bernanke says they'll be paying interest of reserves and trying to work some reverse repo magic to shrink their balance sheet and every single one of those asshats in the House sat there and listened to it as if they had any clue what the guy was saying.
Meanwhile, Philadelphia Fed's Chuck Plosser is not at all cool with any of it (more WaPo):
Some members of the Fed's policymaking group, the Federal Open Market Committee, have been pushing to sell off the assets relatively quickly, both to prevent a burst of inflation down the road and to avoid a situation in which the Fed is essentially subsidizing one type of borrowing -- home mortgages -- but not others.
"We can always sell assets," Charles Plosser, president of the Federal Reserve Bank of Philadelphia, said in an interview last week. "I think we need to be open to that. In the long run, the Fed needs to get back to a balance sheet . . . that looks like all Treasurys, and is at a much smaller level. . . . Ultimately we have to shrink the balance sheet."
No shit, Chuck, thanks SO much for reiterating what we all already know for the bazillionth time, that's really useful of you.