US Congress should not encroach on Fed, Fisher says

WACO, Texas Jan 12 (Reuters) - Dallas Federal Reserve Bank President Richard Fisher said on Tuesday that efforts by the U.S. Congress to meddle with monetary policy risk putting the country on the path to "economic ruin."

Bemoaning the economic risks of large government deficits, Fisher said attempts to print money to finance spending always prove disastrous.

"We know from history that when fiscal authorities turn to the monetary authority to monetize their debts, the result is inevitably inflation and financial ruin," Fisher told the Waco Business League.

"That is the lesson learned from Ancient Rome, from Weimar Germany, from Nationalist Argentina and, in its most egregious present form, from modern Zimbabwe."

Fisher largely shied away from commenting on the outlook for the economy or monetary policy, focusing instead on government efforts to reform the central bank.

He said the Fed's role as a regulator helps inform its function as a monetary authority and lender of last resort. One proposal in the Senate, initiated by Christopher Dodd of Connecticut, would largely strip the central bank of its supervisory authority.

Congress is in the process of debating financial reform following the worst meltdown since the Great Depression, which many analysts blame on lax regulatory oversight.

Fisher admitted that the central bank had made some mistakes, but argued it was already undertaking its own efforts at internal reform.

"We should not now politicize an institution that, in the turbulence of this period, pulled our economy back from the brink of the abyss and has taken significant steps to repair the holes in its regulatory and supervisory apparatus," Fisher said.