August 21, 2013

“Why has the Fed given up on America’s unemployed?”, is a question that is at least a decade late

Sir, Adam Posen, the president of the Peterson Institute for International Economics asks, “Why has the Fed given up on America’s unemployed?”, August 21.

He should have asked that long ago, because when the Fed, as a bank regulator, accepted the thesis that banks could have much lower capital requirements when holding exposures to the “absolutely safe” AAAristocracy, than when lending to the “risky” medium and small businesses, entrepreneurs and start-ups, the Fed helped to impose regulatory risk-aversion, and thereby gave up on the risk taking needed to keep the real economy producing jobs.