Federal Reserve official Randy Quarles parting shot: First Covid stimulus, then ‘colonizing Mars’

The emergency lending facility the Federal Reserve introduced at the start of the pandemic threatens to set a dangerous precedent that will pressure the central bank to fund all kinds of government projects — including even the “colonization of Mars,” an outgoing senior official. Responsible caution.

Randy Quarles, who is he? step down As governor of the Federal Reserve this month, he took a cautious tone about the unprecedented support provided at the start of the coronavirus crisis by the US central bank, which has implemented a series of programs to ensure the smooth flow of credit to households, businesses and local governments.

Quarles said the facilities set up for the pandemic “set a precedent that the Fed can lend to businesses and municipalities,” which should encourage those with big plans and a little patience for democracy to demand more action in the future.

“There will inevitably be those . . . who will start to wonder why the Fed can’t fund repairs to the country’s old infrastructure, or fund the construction of a border wall, or buy trillions of dollars in green energy bonds, or secure the colonization of Mars,” Quarles said. He appointed Donald Trump, who served as one of the chief watchdogs on Wall Street before his term expired in October.

In addition to cutting interest rates to zero and unveiling a massive bond-buying program, the Fed put up 13 facilities under powers that allowed it to make asset purchases in “extraordinary and emergency circumstances” with the support of the US Treasury to cover any losses.

Overall use of the software was low, as it was merely the Fed’s promise to act to placate investors.

But Quarles said the central bank’s willingness to wade into risky markets such as junk corporate bonds and municipal debt “[breached] The long, impenetrable firewall of direct lending to non-financial companies.” He added at an event hosted by the American Enterprise Institute, a right-leaning think tank, that, if abused, could cause “significant” harm to the foundation’s mission.

Quarles reiterated his support for the Fed’s coronavirus response, but cautioned that an institution freed from “Congressional appropriations” would have “the greatest political consequences and political control over it would be a great reward.”

This would further embolden the ‘grave financial irresponsibility, and the accompanying pressures will be overturned [the Fed] From a non-political technocratic institution. . . in the most politically intertwined organization in the country.”

If the Fed is forced to provide these kinds of facilities in the future, Quarles urged the central bank and Congress to move all issues related to governance and finance “without delay” to a “non-FED facility” that would be responsible for management and eventually withdraw support. .

In his notes Thursday, Quarles also suggested potential improvements to the rules and regulations guiding the largest financial institutions, including changes to the way banks are subject to stress testing and an adjustment to leverage requirements that dictate how much capital lenders should hold.

He also urged policy makers to show “reasonable limitations” in regulating digital assets such as stablecoins.

Quarles came under fire during his tenure for what progressive Democrats said was a dilution of the post-global financial crisis regulatory system.

The Biden administration is now under pressure to fill the vacancy with someone more hawkish on Wall Street. Sarah Blum Raskin, who previously served as Federal Reserve Governor and in senior positions at the Treasury Department, is said to be under consideration, as is Richard Cordray, a former director of the Consumer Financial Protection Bureau and an ally of Democratic Senator Elizabeth Warren.

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