Malpass on the Fed

http://www.futureofcapitalism.com/2010/09/malpass-on-the-fed

It really is a shame that David Malpass fell short in the primary to run for U.S. Senate in New York, because he is such a useful and provocative voice on economic policy. His voice is still there, it's just heard primarily by his Encima Global clients rather than by the wider audience that would hear a senator. If we are lucky he'll end up at the Federal Reserve or the Treasury Department in a new administration.

A couple of choice quotes from an e-mail Mr. Malpass sent today: "If the Fed buys more Treasuries without changing bank regulations, it will be pushing on a string from the standpoint of bank lending and will be flattening a yield curve that is already flooded with liquidity. The Fed is making $100 billion or so per year in profit, mostly on duration risk – that's a tax on the private sector, so adding to it won't be stimulative."

And: "Faulty Fed policy -- the dual mandate, 0% Fed funds rate, politicization, sprawling regulatory role, and disinterest in the value of the dollar as an indicator of monetary policy -- argues for a repetition of the Fed's track record of wild inflations and deflations, justifying hedges into gold and bonds. This harms the economy – capital is flowing to mines and bond issuers (mostly governments and big corporations) but not to small businesses or new hiring due to the uncertainty over taxes, regulation and inflation/deflation."

by Ira Stoll  |  Sep 29, 2010 at 4:34 pm Related Topics:  Federal Reserve, New York, Politics, Taxes receive the latest by email: subscribe to the free futureofcapitalism.com mailing list