Rep. Campbell to Fed Chairman: Numerous Risks In Current Monetary Policy
February 27, 2013
Washington, Feb. 27 - Delivering his opening statement at the House Financial Services Committee Hearing on Monetary Policy and the State of the Economy, Rep. John Campbell (R-CA) tells Federal Reserve Chairman Ben Bernanke that his monetary policy has gone too far. In his remarks, Rep. Campbell lays out 7 major risks inherent in the Federal Reserve's Monetary Policy, especially with regard to Quantitative Easing.
Complete Transcript of Rep. Campbell's Opening Statement:
"Thank you Mr. Chairman, and welcome, Mr. other Chairman. You said yesterday and you'll say today that you believe that the short term benefits of the current loose monetary policy exceed the longer term risks. We know from the release of the Fed Open Market Committee minutes last week that there is some dissension within the FOMC on that viewpoint. I am going to join in the chorus of dissension about that viewpoint."
"I would like to quickly detail out seven risks that I believe exist, which together are exceeding what I believe are now the meager benefits of the current monetary policy."
"First of all, there are bubbles out there. I would argue that there is one in high yield bonds, perhaps in farmland, and certainly in the federal budget."
"Second, where there are not bubbles, there are distortions as people are having difficulty pricing risk and there are distortions in the economy. When these bubbles and distortions unwind, they create problems."
"Third, I hear all the time that the major investment and business strategy now is don't fight the Fed. That's not a real business strategy. That's not looking out at long term vision. That's not making decisions on where you think markets will go. That is simply following the directive of an agency that unfortunately has two great a footprint, in my opinion, in the economy today."
"All of this is actually not injecting certainty but, in my view, injecting uncertainty into decision making in the economy today. And, that's number four."
"Number five is that savers and retirees are forced into riskier assets in the search for some sort of yield. When this unwinds, that is going to be a problem for savers and retirees. We all, in economics, learned early on that as you get older, take less risk. But, now what we find is as people are getting older, they are having to violate that principle. And, in search of some kind of yield, are taking much, much greater risks - which could be a problem in the future."
"Number six. For every 1% that the interest rates on Treasury bills go up, it will add $1 billion of deficit to the federal budget.
And number seven, the Federal Reserve, itself, has risks now with the large balance sheet and large number of holdings that the Federal Reserve has. In this member's opinion, Mr. Chairman, we have gone too far in the monetary policy and the monetary easing. And, it is, in this Member's opinion, time to pull back."