CRFB Releases Paper on the Fed's Extrordinary Actions to Address the Financial and Economic Crisis

Washington, D.C.—As the Federal Open Market Committee (FOMC) meets today and tomorrow to discuss its semi-annual monetary policy outlook, the Fiscal Roadmap Project of the Committee for a Responsible Federal Budget is releasing a comprehensive paper on the Fed's actions to address the financial and economic crisis.

"The Extraordinary Actions taken by the Federal Reserve to Address the Financial and Economic Crisis" looks at the aggressive and crucial steps the Fed has taken since the summer of 2007 to save the financial system and stabilize the economy.

The paper frames some of the key issues the FOMC is expected to discuss.

The paper also discusses implications of the Fed's actions for inflation, monetary and fiscal policy:

• There are various ways in which the massive resources created by the Fed to fix the financial and economic crisis might be unwound.

• While the Fed has increased information released to the public, it needs to do even better.  Transparency and accountability are particularly important for the taxpayer.

• More specifically, to improve transparency and accountability, the Fed needs to provide more information on the accounting of any guarantee component of its programs, the pricing of risk when it scores its activities for budgetary purposes, plus more details on programs with the Treasury Department and other parts of the government.

• Fundamental changes in financial markets since the 1990s have led the Fed to invent non-conventional policy tools to tackle the crisis.  Some of these tools may need to become part of the Fed's normal toolkit.

Click here for a PDF version of "The Extraordinary Actions taken by the Federal Reserve to Address the Financial and Economic Crisis".

The Fiscal Roadmap Project (FRP) is a new project launched by The Committee for a Responsible Federal Budget (CRFB) to help policymakers navigate the serious fiscal and economic challenges facing the country.   Today's paper is the second in the FRP series.  (See "Good Deficit/Bad Deficit".)  More at www.crfb.org.