Bessent Blasts the Fed for QE, its “Perverse Incentives” for Fiscal “Irresponsibility,” “Wealth Effect” Policies, “Class and Generational Disparities,” Failure on Inflation… Oh I So Agree, by Wolf Richter

Amazingly, the Secretary of the Treasury has publicly blasted the Fed with a series of spot-on criticisms. From Wolf Richter at wolfstreet.com:

“This harmful cycle concentrated national wealth among those who already owned assets”: Bessent.

Secretary of the Treasury Scott Bessent came out today with an essay in the WSJ that blasted the Fed for its “extraordinary” and “nonstandard” monetary policies since 2008, such as QE; its “pursuit of the Wealth Effect”; its interventions that became a “de facto backstop for asset owners,” thereby concentrating “national wealth among those who already owned assets.” He blasted the Fed as bank regulator, citing the SVB collapse. He skewered the Fed for having caused home prices to soar, while “younger and less affluent households, shut out of ownership and hit hardest by inflation, missed out on appreciation.”

“By failing to deliver on its inflation mandate, the Fed allowed class and generational disparities to widen,” he wrote. And much more.

It is refreshing – and 17 years overdue – to see a Secretary of the Treasury, or any sitting government official, lambaste the Fed for its QE and asset-holder-bailout tools that kicked off in 2008, and it’s even more refreshing to see him list some of the horrendous effects the Fed’s tools and policies have had.

Here are some salient quotes from Bessent’s essay:

“The ‘extraordinary’ monetary-policy tools [QE and ZIRP] unleashed after the 2008 financial crisis have similarly transformed the Federal Reserve’s policy regime, with unpredictable consequences.”

“Successive interventions during and after the financial crisis of 2008 created what amounted to a de facto backstop for asset owners.

“This harmful cycle concentrated national wealth among those who already owned assets.”

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