Requests the central bank move quicker in reducing assets.
Senator Rick Scott of Florida wrote another letter to Federal Reserve Chair Jerome Powell on Wednesday, asking why their work to decrease the amount of assets they hold has been moving so slowly.
The Federal Reserve is supposed to have cash on hand so that banks and investment firms can allow their money to gain interest when they place it in America’s central bank. Since the efforts in the wake of the pandemic by President Biden’s administration to stimulate cash flow, the Fed now has what financial experts consider to be too much money.
If the Fed has too much cash on hand, banks and lending companies tend to over-rely on the assets of the central bank, offering loans to consumers that may be unrealistic. This dynamic contributed to the housing crash of 2008.
To prevent potential over-reliance, the Fed has committed to shedding many of its assets through a process it’s calling “reverse repo.” Though the central bank has made progress, Senator Scott has sent multiple letters expressing both urgency and disdain for the Fed’s current strategy.
“It is clear that your current plan to reduce the balance sheet is insufficient, and that it would never solve the problem of your massive balance sheet,” Senator Scott wrote. “It makes no sense to me why you cannot reduce the balance sheet at the same rate you have increased it.”
As the Lord Leads, Pray with Us…
- For Chairman Powell as he considers Senator Scott’s concerns and suggestions.
- For members of the central bank to seek God’s direction as they make financial moves.
- For Senator Scott as he urges the Federal Reserve to move more expeditiously.
Sources: Reuters, ProPublica
