Congress, not Fed, must do more for economy: Fisher

MIDLAND, Tx Wed Aug 17, 2011 2:44pm EDT

Richard W. Fisher, President and Chief Executive Officer for the Federal Reserve Bank of Dallas, speaks on International Economics at the Council on Foreign Relations in New York, March 3, 2010. REUTERS/Shannon Stapleton

Richard W. Fisher, President and Chief Executive Officer for the Federal Reserve Bank of Dallas, speaks on International Economics at the Council on Foreign Relations in New York, March 3, 2010.

Credit: Reuters/Shannon Stapleton

MIDLAND, Tx (Reuters) - The Federal Reserve has no business easing monetary policy further when the real problem facing the economy is fiscal mismanagement in Washington, a top Fed official said on Wednesday.

Speaking for the first time since his dissent last week on the Fed's promise to freeze interest rates near zero for the next two years, Dallas Fed President Richard Fisher - known as an inflation hawk - said his main worry was not the possibility that easy policy could send prices spiraling higher.

Rather, he said, his worry is that the liquidity the Fed has already created is sitting on the sidelines as businesses and households delay spending amid uncertainty over tax and regulatory policy.

The Fed has kept interest rates near zero since December 2008 and has bought $2.3 trillion in long-term securities to support the economy, and yet job creation remains weak and the recovery meager, Fisher said.

The Fed last week extended its already super-easy monetary policy by promising to keep rates near zero through mid-2013, and said it was weighing other options to support a weak recovery.

Three Fed officials - Fisher, Minneapolis Fed President Narayana Kocherlakota, and Philadelphia Fed President Charles Plosser -- cast their vote against the decision, the first triple dissent at the Fed since 1992.

"I believe what is restraining our economy is not monetary policy but fiscal misfeasance in Washington," Fisher said in remarks prepared for delivery to a community forum in Midland, Texas.

U.S. "fiscal authorities" must address the U.S. debt and deficit problems or risk encouraging businesses to move business overseas in search of regimes that provide more certainty.

Businesses "simply cannot budget or manage for the uncertainty of fiscal and regulatory policy," he said. "Monetary policy cannot substitute for what you must get on with doing," he added, addressing lawmakers directly. "Get on with your job."

Fisher's sharp words come just weeks after disagreements over deficit-cutting between Congress and the Administration brought the U.S. to the brink of a first-time-ever debt default.

Ultimately they struck agreement to reduce deficits, but the plan does little to give businesses the certainty they need to resume hiring, Fisher said.

This week two U.S. Republican candidates for president attacked Chairman Ben Bernanke and the Fed's policies for their role in harming the economy. Without referring to specific people, Fisher made it clear he would not take such criticism lying down.

"Pointing fingers at the Fed only diminishes credibility," he said. "The ugly truth is that the problem lies not with monetary policy but in the need to construct a modern, appropriate set of fiscal and regulatory levers and pulleys to better incentivize the private sector to channel money into productive use in expanding our economy and enriching our people."

It's a refrain that Fisher has repeated many times over the last year and a half, and that sets him apart from his fellow dissenting colleagues, who cited worries over inflation and the strength of the economy for their dissents.

Inflation as measured by the Fed's preferred core PCE price index rose to 1.3 percent in the 12 months ended in June, from a low last December of 0.9 percent. Unemployment fell to 9.1 percent in July, down from just over 10 percent at its peak last year.

(Reporting by Ann Saphir)

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Comments (5)
USAPragmatist wrote:
Here is some food for thought for you tea-party people out there….

“Pointing fingers at the Fed only diminishes credibility,” he said. “The ugly truth is that the problem lies not with monetary policy but in the need to construct a modern, appropriate set of fiscal and regulatory levers and pulleys to better incentivize the private sector to channel money into productive use in expanding our economy and enriching our people.”

See people, government is NOT BAD, “appropriate” regulations can stimulate an economy, not just getting rid of regulations like you all want to do. And that is exactly what got in the 00′s leading up to the financial crash.

Aug 17, 2011 1:49pm EDT  --  Report as abuse
gruven137 wrote:
What’s amazing to me in this day and age of free information, is how many people don’t know the Federal Reserve is not part of the US government. It is a private, for-profit banking cartel that controls our money supply. It’s about as “federal” as Federal Express. The Federal Reserve Chairman, Ben Bernanke, is just the cabal’s mouthpiece. Nobody tells the FED what to do and they do not “answer” to anyone, not even Congress…and they have never been audited by anyone in their 100 year history.

Aug 17, 2011 1:51pm EDT  --  Report as abuse
Statistician wrote:
gruven137, I am afraid your answer is only partly right.

The 12 banks in the Federal Reserve districts are, indeed, private, not-for-profit entities or, more precisely, they are not Federal entities. Their voting stock is owned by the member banks in their districts (Boston, New York, Philadelphia, Cleveland, Richmond, Atlanta, Chicago, Minneapolis, St Louis, Kansas City, Dallas, and San Francisco.) The boards of directors of these districtt banks are in three classes of three: three members elected from the district banking community, three elected among the non-bank businessmen of the district, and three appointed by the Board of Governors.

Now, however, the Board of Governors IS a Federal entity. The seven members of the Board are appointed by the President and confirmed by the Senate. Board members serve for 14 years (to isolate them from politics) and the term of a member expires every other year. At one time, the Secretary of the Treasury was an ex officio member of the Board of Governors.

Your statement about never being audited is clearly false. GAO has audited FRB operations, particularly the actions taken during the credit crisis.

This information is publicly available.

Aug 17, 2011 2:07pm EDT  --  Report as abuse
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