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| June 7, 2010: Federal Reserve Bank of Dallas President Richard Fisher said on Thursday, June 3, 2010, that while it’s not time for central bankers to tighten monetary policy, they may be “getting closer” as the economy further expands this year, according to Bloomberg. “I’m not sure we’re there yet,” Fisher said in response to audience questions after a speech in Dallas, reiterating comments he made in May, 2010. “At the same time, I think we need to be ready and we need to be ready to move fairly quickly.” Minutes of the Fed’s most recent meeting in April, 2010, show that Chairman Ben S. Bernanke and his colleagues are trying to reach a consensus over when to reduce the Fed’s balance sheet as the economy recovers. Fisher, a non-voting member of the Federal Open Market Committee this year who didn’t attend the meeting, said he’s one of only a few members who believe it’s unnecessary to raise the federal funds rate before selling assets. “We should be as optimistic as we can in the market place,” he said. Mortgages rates “have come down, Treasuries are trading at very attractive yields, and the reason for that right now is a flight of safety” into the U.S., he said. Fisher said that “overall tightening of monetary policy right now, at this moment, is not called for, but we may be getting closer to that point, particularly as we continue to grow.” Fisher’s remarks occurred after a speech in which he said U.S. regulators must reduce the size of the nation’s biggest banks to eliminate the problem of “too big to fail” financial institutions. The 61-year-old policy maker, who doesn’t vote on the FOMC again until 2011, has repeatedly called for the breakup of such firms since March, 2010. “The dangers posed by institutions deemed” a potential threat to financial stability should they fail “far exceed any purported benefits,” he said at a dinner sponsored by the Southwestern Graduate School of Banking. “If we are to neutralize the problem, we must force these institutions to reduce their size.” Lawmakers such as U.S. Senate Banking Committee Chairman Christopher Dodd and Representative Barney Frank, chairman of the House Financial Services Committee, have said they aim by July 4, 2010, to enact the biggest overhaul of U.S. financial regulation since the 1930s. The Senate version of the bill, approved in May, 2010, would restrict proprietary trading by banks and provide a mechanism for liquidating failing firms. Congress is attempting to strengthen rules for Wall Street and prevent a repeat of the credit crisis that led to taxpayer-funded bailouts for banks including Citigroup Inc. and Bank of America Corp. The global financial crisis, which began with the collapse of the U.S. subprime-lending market in 2007, has led to $1.77 trillion of writedowns and credit losses at banks and other financial institutions, according to data compiled by Bloomberg. |
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