Large Fed balance sheet distorts credit allocation
The guest argued that the Fed's large balance sheet is economically inefficient and politically problematic, as it disintermediates funding markets and distorts credit allocation.
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The guest argued that maintaining an 'ample reserves' regime with a large balance sheet creates political economy costs and invites other government entities to use the Fed's balance sheet for politicized purposes, threatening its independence.
The guest argued that the Fed's large balance sheet is economically inefficient and politically problematic, as it disintermediates funding markets and distorts credit allocation.