Fed's Fisher: Washington Is Holding Back Job Creation
Politicians in Washington are holding back the U.S. economy and job growth can't reach its full potential until Congress gets its act together, said Richard Fisher, president of the Federal Reserve Bank of Dallas.
In an environment where monetary policy is "extremely accomodative," Fisher is disappointed that the economy hasn't seen job creation that should follow. "Inflation is not an issue, I don't think you can say that inflation is doing any damage to the economy," he said Wednesday on CNBC's "Squawk on the Street."
"The question why aren't we getting job creation, I think we do know the answer: fiscal policy," he said. "You cannot make decisions under conditions of total uncertainty. We have a massive fog here, our businesses are well structured from a financial standpoint. Our companies are rich with cash, there's a lot of cash sitting on the sidelines."
"Why hasn't this been going into the economy? The answer, I think, is pretty clear, but I think it's clear to everybody now," he said. Uncertainties include taxes, government spending, regulatory pressures and health care costs, "so the fault lies with the fiscal authorities and until they get their act together, give us some certainty, I don't think we're going to get the kind of growth we'd like to see."
"We have great potential in this country, and it's not being realized because the politicians are holding us back," he said.
Fisher has also been critical of the Federal Reserve's program of quantitative easing, urging the central bank to begin to end its program of "monetary ritalin", because markets have become addicted to cheap money. He said that QE3 has the potential to hurt the country's economic recovery.
"There is no QE infinity," Fisher said. "Somewhere there have to be practical limits of how far we can build our balance sheet. This has been an effort to juice the economy and it has done its work but the question is 'what are the limits?'"
Fisher said that the Fed has the tools to exit its massive asset purchase program, but "the real question is, 'How do you get it done?'" he said. With the Fed purchasing close to 90 percent of new mortgage-backed security issuance, "we know it's easy to buy things but when you go to sell, how are you going to handle it?"
Fisher sees the next stage as being a re-evaluation of asset purchase patterns, and his personal preference would be to taper in mortgage backed security holdings before Treasury assets. "We're accumulating so much, the question is what we can do with it," he said.
On financial regulation, Fisher said that Dodd-Frank needs to be re-worked. "The problem that was the premise and the purpose of that legislation has not been resolved," he said. "I think Dodd-Frank went way too far, it's way too complicated."