Testimony on Unwinding Excesses in the Fed’s Balance Sheet
The Fed’s dramatic expansion of its massive quantitative easing programs while the economy was growing and financial markets were functioning normally have served no economic purpose, are risky on many dimensions and inappropriately involve the Fed in credit allocation. As such, the Fed must embark immediately on a strategy that would gradually unwind the assets in its portfolio as part of normalizing monetary policy.
While the Fed’s asset purchase decisions during the financial crisis were made in an emergency situation, the Fed’s dramatic expansion of its massive quantitative easing programs while the economy was growing and financial markets were functioning normally--and its ongoing reinvestment policies that maintain a bloated balance sheet—have served no economic purpose, are risky on many dimensions and inappropriately involve the Fed in credit allocation.
As such, the Fed must embark immediately on a strategy that would gradually unwind the assets in its portfolio as part of normalizing monetary policy. Doing so will enhance economic performance, support a healthier banking system and reduce unnecessary risks.
Read the full testimony here:
Testimony Unwinding Excesses in the Fed’s Balance Sheet.pdf
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