Bloomberg News

Fed’s Fisher Says Congress Instead of Fed Should Spur Jobs

February 17, 2012

(Updates with comment on policy in sixth paragraph.)

Feb. 15 (Bloomberg) -- Federal Reserve Bank of Dallas President Richard Fisher said more Fed easing may backfire and that Congress and the Obama administration should streamline tax and regulatory policies to spur long-term job growth.

“No amount of monetary accommodation will change the pathology” businesses face, Fisher said today in a speech in San Marco, Texas. “Excessive monetary accommodation might only add a further dosage of angst, fueling fears of future inflation.”

The Fed on Jan. 25 said it will keep rates near zero at least through late 2014, extending a previous date of mid-2013 or later. The Dallas Fed president, who doesn’t vote on policy this year, has been among the most vocal internal Fed critics, dissenting last year twice against moves to push down long-term rates and to keep the benchmark U.S. interest rate near zero until at least mid-2013. He voted five times in 2008 in favor of tighter policy.

“The greatest impediments to investing in and creating jobs in the U.S. are the current tax code and regulatory burden and uncertainty, as well as lagging workforce skills,” Fisher said in a speech to the Texas Manufacturers Summit 2012. Fisher cited a recent Harvard Business School survey of businesses that “more than 70 percent of respondents expect U.S. competitiveness to decline” over the next few years.

‘Run-Away Deficits’

“No one -? business operator, worker or consumer -? can plan for the long term with confidence until the federal government removes the angst that is associated with run-away deficits and unfunded liabilities that threaten to drown our economy in debt,” Fisher said.

The Dallas Fed president reiterated to reporters after his speech that he sees no need for a new round of asset purchases by the Fed, or so-called quantitative easing. Such a move may provoke renewed lawmaker opposition, he said.

“The enormous firestorm that we’ve created on Capitol Hill” after the purchases of bonds would again be a risk, Fisher said. “We took a lot of blowback” in response to the second round of quantitative easing, he said. “We have rebuilt a lot of goodwill.”

The idea of a third round of asset purchases is “a fantasy of Wall Street,” Fisher said. “It’s not necessary and there’s no need for additional monetary accommodation unless we slip into deflation, which doesn’t seem to be the case,” or some “extreme crisis.”

Too Big a Share

Fed purchases of securities could take too big a share of the market, he said.

“We’re beginning to crowd things out” on certain points of the yield curve, Fisher said.

U.S. stocks were little changed amid concern that European officials will delay Greece’s second bailout. The Standard & Poor’s 500 Index rose 0.2 percent to 1,352.88 at 11:24 a.m. New York time. Yields on 10-year Treasury notes fell two basis points, or 0.02 percentage point, to 1.92 percent.

Fed Chairman Ben S. Bernanke said in a press conference after the Jan. 25 Federal Open Market Committee meeting that the Fed is keeping the option open of buying more bonds. The Fed pushed down the rate close to zero in December 2008 and has engaged in two rounds of asset purchases totaling $2.3 trillion to boost the economy and reduce the jobless rate of more than 8 percent.

In his brief description of the U.S. economy, Fisher said, “the national unemployment rate is beginning to ebb. But too many Americans remain out of work and for too long.”

Most of Speech

Fisher devoted most of his speech to describing Texas’s economy. He said Texas has been one of three states to reach peak employment again following the past recession in part because of tax and regulatory policies that favor job creation. A restaurant operator may spend as much as two years to get a permit for expansion in California that takes six weeks in Texas, Fisher said.

“If you examine the differences among New York and California and Texas, you will note that these former power states have less flexible labor rules,” Fisher said.

Fisher, 62, has been president of the Dallas Fed since 2005. His district includes Texas, northern Louisiana and southern New Mexico.

--Editors: James Tyson, Christopher Wellisz

Aki Ito in San Francisco at aito16@bloomberg.net;

To contact the reporters on this story: Steve Matthews in Atlanta at smatthews@bloomberg.net;

To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net


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