From The Foundry

    The Fed is Part of the Problem Too

    Posted by Conn Carroll | 15 Jun

    We have long believed that the Treasury Department’s TARP interventions have become possibly the single most disruptive force in the global economy. Under the header The Beatings Will Continue Until Morale Improves, EconLog’s David Henderson flags a New York Times story suggesting that the Fed has become just as unhelpful an actor:

    The New York Times today carries a story about how the Federal Reserve Board is making decisions about who gets loans and who doesn’t. The reporter, Edmund Andrews, writes:

    But the financial crisis has drastically changed the role of the Fed, forcing officials to get their fingernails a bit dirty.

    Since March, when the Fed stepped in to fill the lending vacuum left by banks and Wall Street firms, officials have been dragged into murky battles over the creditworthiness of narrow-bore industries like motor homes, rental cars, snowmobiles, recreational boats and farm equipment — far removed from the central bank’s expertise.

    Note the author’s use of the word “forcing.” This is one of the most misused words in reporting and, indeed, in modern conversation and writing. No one forced the officials to do what they’re doing. They chose.

    Here’s the passage that led to this post’s title:

    Fed officials say they, too, are uncomfortable with their new role and hope to end it as soon as credit markets return to normal.

    Umm, do you think there’s any connection between the Fed’s role in allocating credit and the credit markets not returning to normal?

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