Tuesday, April 14, 2009

Bloomberg Commentary

Fed’s Flood May Leave Democracy Needing Bailout: Kevin Hassett

"Many economists believe that helping financial institutions turn their less liquid assets into hard cash is a key step toward returning them to good footing. The best way to achieve that in a democracy would be for Congress to appropriate the funds to acquire the assets and for Treasury to borrow the money that it needs.

But Congress is unwilling to appropriate enough money, so Treasury and the Fed have cooked up a work-around: the Fed buys the assets instead. Since the Fed exists outside of the normal budget process, no permission from elected officials is required. "

The economic activities are not the only area affected by the monetary policies.