By introducing another program to buy MBSs [mortgage-backed securities], to the tune of $40 billion per month, the FOMC [Federal Open Market Committee, headed by Fed Chairman Bernanke] is supporting the long-standing federal policy of special aid to housing, real estate and mortgage interests.
These federal policies were the largest single contributor to the financial crisis. Why would the Federal Reserve want to encourage continuation of these federal policies?
My, my, the landscape does look a little different from the outside, doesn’t it, Mr. Poole?
He is about my age. He attended Swarthmore (I attended Cornell) and received a BA degree in 1959 (I got mine in 1963). He got his MBA from the University of Chicago in 1963 (I got mine in 1964, also from Cornell), and then went on to get his PhD in economics at the University of Chicago. (I didn’t. I went to work in the private sector.)
He started his career in government by working for the Federal Reserve’s Board of Governors from 1964 to 1974. Then he joined the faculty at Brown University, chairing the economics department there.
Fast forward: in 1998 he served as CEO of the Federal Reserve Bank of St. Louis, and left in 2008, and now is a Senior Fellow at Cato(!).
Somewhere along the way he got religion. I have great respect for Cato and they wouldn’t hire a fool. Nor would they bring in a Keynesian to undermine their efforts to expose that fraud unless he was an escapee from the reservation.
But listen to what Poole said:
The Federal Reserve says that it is apolitical but this decision is directly supportive of continuation of the current status of Fannie Mae and Freddie Mac. This action is not monetary policy but fiscal policy, extending credit to a favored industry. This policy is crony capitalism, whether practiced by the federal government or by the Federal Reserve.
This is perfect: “crony capitalism” – “extending credit to a favored industry” – “not monetary policy but fiscal policy.” Amazing!
My questions for Mr. Poole: how long did it take you to overcome your Keynesian mindset and enter the real world? Are you a “recovering Keynesian?” Are you just an opportunist? When and how did you see the light? Is there hope for others still on the reservation?
I’d sure like to know.