The Federal Open Market Committee (FOMC) is in the process of winding down its massive purchases of Treasuries and mortgage-backed securities. At our last meeting, in recognition that the economy is improving and acknowledging that we have generated massive amounts of excess reserves among depository institutions operating in the U.S., we voted to reduce our purchases to a combined $ billion per month, on the path to eliminating them at the earliest practicable date. Speaking only for myself as a voting member, barring some destabilizing development in the real economy that comes out of left field, I will continue to vote for the pace of reduction we have undertaken, reducing by $ billion per meeting our purchases and eliminating them entirely at the October meeting with a final reduction of $ billion. I was not for this program, popularly known as QE3, to begin with. I doubted its efficacy and was convinced that the financial system already had sufficient liquidity to finance recovery without providing tinder for future inflation. But I lost that argument in the fall of 2012, and I am just happy that we will be rid of the program soon enough. I am often asked why I do not support a more rapid deceleration of our purchases, given my agnosticism about their effectiveness and my concern that they might well be leading to froth in certain segments of the financial markets.
I expect that our new Chair, Janet Yellen, will play a significant role here as she uses her press conferences to explain what simply cannot be communicated with a series of dots or within the statement we release after each meeting. Alas, there is Congress Now mind you, your monetary authority – your Federal Reserve – does not hold every card to your future in its hand. No matter how clearly we communicate, no matter how expertly we tailor our supervision of your banks, no matter how we conduct monetary policy, our work is necessary but not sufficient to the success of the Louisiana, Texas and U.S. economies. The fiscal authorities – Congress and the executive branch – must do their job to provide the proper tax, spending and regulatory incentives for businesses to take advantage of the cheap and abundant money the Fed has made possible and put it to work to grow, expand their payrolls and let America truly prosper. I will spare you my thoughts on Congress (it is not very central banker-like to resort to profanity). All I will say is that you and your neighbors and friends and customers are the ones who elect people to office and whether you are a “D” or an “R,” you need only look at yourself in the mirror to see who is in charge of placing the right people in office to get the job done of putting the American economy back on track. I’d say you have some serious work to do here.