Federal Reserve Bank of Philadelphia President Charles Plosser criticized the Fed's lending programs on Monday for failing to establish clear guidelines.
Speaking in Chicago, Plosser said the Fed also neglected to designate to whom it would lend, or why, increasing the potential for volatility in markets. In the future, the Fed might be expected by outside parties to maintain lending programs for too long, he said.
The Fed needs to find a way to eventually wind down its balance sheet, Plosser said, to avoid disrupting price stability in the States.
Plosser also warned against creating a "quick fix" for financial problems, and called for heightening regulation of nonbank institutions.
However, he cautioned against giving the Federal Reserve too much regulatory responsibility, arguing it could jeopardize the Fed's mandate to maintain price stability, support economic growth and regulate monetary policy.
By Megan Ainscow
©CEP News Ltd. 2009