Tags: Bill | Fed | bank | bailouts

Warren, Vitter Combine on Bill to Restrict Fed Bank Bailouts

By    |   Monday, 11 May 2015 09:34 PM

Two unlikely allies — liberal Sen. Elizabeth Warren, D-Mass., and conservative Sen. David Vitter, R-La. — are combining forces to create a bill that would curtail the Federal Reserve’s power to offer emergency loans to financial institutions in a crisis.

The legislation could be introduced soon, sources tell the Financial Times. The Fed deployed emergency loans during the 2008-09 financial crisis.

In a joint statement last week, Warren and Vitter's offices said, "the two senators are  working on legislation to further halt megabank bailouts during a crisis."

Fed critics hailed the action. "People will try to portray this [bill] as something far out, but it’s absolutely not," Marcus Stanley policy director of Americans for Financial Reform, told the FT.

"They’re long-accepted principles that have traditionally governed lending of last resort and are well-supported by academic research."

Not surprisingly, the Fed and its allies oppose the move. "I hope Congress keeps in mind why they founded the Fed in 1913 and allows the Fed to adapt its facilities to a 2015 world," former Fed Gov. Donald Kohn told the FT.

Many Republicans are upset with the Fed's massive easing program that has kept the federal funds target rate at a record low of zero to 0.25 percent since December 2008 and expanded the central bank's balance sheet to $4.5 trillion.

Meanwhile, you can add Microsoft co-founder Bill Gates to the list of those who warn that near-zero interest rates around the globe spark grave potential danger.

"The environment with low interest rates — it's globally so unusual. It really shouldn't persist," he told CNBC. "It creates problems in terms of leverage and bubbles."

Some experts think Fed easing already has created bubbles in some financial markets, including stocks. The S&P 500 index has tripled over the past six years.

But exiting low rates isn't so easy, Gates notes. "How do we get out of it without creating some economic setback? It would be very difficult," he said.

Most economists don't expect the Fed to raise rates until at least September.

Related Stories:

© 2020 Newsmax Finance. All rights reserved.


   
1Like our page
2Share
StreetTalk
Two unlikely allies - liberal Sen. Elizabeth Warren, D-Mass., and conservative Sen. David Vitter, R-La. - are combining forces to create a bill that would curtail the Federal Reserve's power to offer emergency loans to financial institutions in a crisis.
Bill, Fed, bank, bailouts
356
2015-34-11
Monday, 11 May 2015 09:34 PM
Newsmax Media, Inc.
 
Newsmax TV Live

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