Tags: plosser | fed | toxic | assets

Plosser: Fed Should Stay Out of Toxic Assets

By    |   Wednesday, 03 Jun 2009 10:27 AM

Charles Plosser, president of the Philadelphia Federal Reserve Bank, says the Fed shouldn’t be lending money for investors to buy banks’ troubled assets.

“I think it is a bridge too far,” he told the Financial Times. “I have reservations about the Fed intervening in private credit markets as a matter of principle. I think it confuses monetary and fiscal policy.”

The Fed has agreed to consider making loans for toxic asset buys as part of the government’s program to clean up bank balance sheets.

Plosser argues the Fed shouldn’t provide the financing because that would expose the central bank to credit risk and put a sizable amount of long-term assets that are illiquid and difficult to price on its balance sheet.

His view puts Plosser at odds with Fed Chairman Ben Bernanke. The chairman maintains Fed loans to spur toxic asset sales won’t unduly burden the Fed’s balance sheet or impose too much credit risk.

While Plosser is more concerned than some of his colleagues about the loans, he is less concerned than some of them about the Fed directly buying Treasury bonds.

“I do not think that buying Treasuries is more inflationary than buying mortgage-backed securities,” he told the Financial Times.

As for the toxic assets, Treasury Secretary Tim Geithner says banks may have less need for assistance now that their finances are recovering. But “we still think they [programs to spark toxic asset sales] have some value," Geithner told CNBC.

© 2017 Newsmax. All rights reserved.

 
1Like our page
2Share
StreetTalk
Charles Plosser, president of the Philadelphia Federal Reserve Bank, says the Fed shouldn’t be lending money for investors to buy banks’ troubled assets.“I think it is a bridge too far,” he told the Financial Times. “I have reservations about the Fed intervening in private...
plosser,fed,toxic,assets
242
2009-27-03
Wednesday, 03 Jun 2009 10:27 AM
Newsmax Inc.
 

Newsmax, Moneynews, Newsmax Health, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, and Newsmax World are trademarks of Newsmax Media, Inc.

NEWSMAX.COM
MONEYNEWS.COM
© Newsmax Media, Inc.
All Rights Reserved