Federal Reserve official disagrees with monetary policy decisions
The head of the 10th Federal Reserve District, which includes Oklahoma, thinks the Federal Reserve should stop trying to stimulate the economy and cut unemployment through its monetary policy.
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The Federal Open Market Committee holds eight regularly scheduled meetings a year. The committee reviews economic and financial conditions, determines the appropriate stance of monetary policy, and assesses the risks to its long-run goals of price stability and sustainable economic growth. The committee consists of 12 members — the seven members of the Board of Governors of the Federal Reserve System; the president of the Federal Reserve Bank of New York; and four of the 11 Reserve Bank presidents, who serve one-year terms on a rotating basis. Nonvoting Reserve Bank presidents attend the meetings, participate in discussions, and contribute to the Committee's assessment of the economy and policy options.
Columnist George Will recently published a complimentary column after meeting with Esther George, president of the Kansas City Federal Reserve Bank. He referred to her as “refreshingly retrograde” in her contrarian take on the central bank's attempts to manage the economy. He also suggested that Mitt Romney, who has said he wouldn't reappoint Fed Chairman Ben Bernanke if Romney becomes president, should pick “someone such as George.” When asked about that on Tuesday, she laughed and then ducked the issue, saying, “George Will's a nice guy, but those are somebody else's decisions. Not mine.”
George is not the only committee member to oppose another round of stimulus. Richmond Fed President Jeffrey Lacker cast the lone dissenting vote in the panel's 11-1 decision, and Dallas Fed President Richard Fisher said he also would have voted against QE3.
George said the slow recovery isn't surprising considering the depths of the recession.
“The research shows us that after a financial crisis, and one of this magnitude, it takes time to repair, to repair household balance sheets, to repair the banking system, to get things back on track. I'm not a believer that you can speed that process up,” she said.
She also questioned whether monetary policy — often called a “blunt instrument” — is the proper tool for dealing with a slow-growing economy.
“Other than setting broad conditions, we can't allocate in a way that would help us fine tune where we want to see improvement in the economy,” she said. “And I worry if the public expects, or thinks that's what we're trying to do, if we think that's what we're trying to do, I think we step outside of what we are supposed to do and can do.”
George receives information from boards that include business leaders from Oklahoma and from the six other states the Kansas City Fed provides oversight for. Businesses, she said, are slow to hire because they're dealing with “paralyzing” political, regulatory and fiscal uncertainty. Consumers, meanwhile, are trying to shed debt while many are coping with employment insecurities, she said.
The Fed, unlike Congress, has the ability to reach consensus and act quickly. That may be part of the problem, she said.
“That is what I worry about,” she said. “Just acting because we can, because we're a deliberative body that can create money and so we should just do that. I think that fails to look ahead and say, “Are we setting, are we creating something that is responsible down the road? Are we thinking long-term about the effects of these actions?”
The 10th Federal Reserve District includes Oklahoma, Kansas, Colorado, Nebraska, Wyoming, western Missouri and northern New Mexico. George said the region's economy is stronger than that of the nation as a whole, mainly due to robust energy and agriculture sectors.