... Congress has a quite proper role in determining the magnitude of the fiscal risk that the Fed opts to assume. Congress's statutory limit on the quantity of debt that the Treasury can issue is something I have previously derided as political circus. But a statutory limit on the non-Treasury assets that the Fed is allowed to hold might make sense. Perhaps the outcome of a public debate on this issue would be a decision that the Fed needs the power to lend to private borrowers even more than the $800 billion or so limit that it would run into from completely swapping out its entire portfolio. Indeed, Greg Ip speculates on the possibility that the Fed could "ask Treasury to issue more debt than it needs to fund government operations." Surely that would be something that should require congressional approval. Or perhaps after deliberations, Congress would decide that the business of swapping Treasury debt for private sector loans is one that is better run by the Treasury rather than the Federal Reserve.
In any case, I agree with both Reich and Volcker on this much-- these are not decisions that the Federal Reserve should be making on its own, nor on the basis of behind-the-scene consultations with the President or congressional leaders. Bernanke needs to ask for explicit statutory authorization for his plans.
Also from James, a nice map of gasoline prices:
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