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Fed Should Stop Buying Treasurys: Steve Forbes

The Federal Reserve should stop buying government debt and instead focus on kick-starting areas of the credit markets having to do with consumers, Steve Forbes, Forbes CEO, told CNBC Monday.

Financial System Still in Trouble: Forbes CEO

"Amazingly, since December the Fed's balance sheet hasn't grown one single dollar. The Federal Reserve has been tight-fisted, amazingly, in the last five months," Forbes told "Squawk Box Europe."

"I think the Fed should announce first they're not going to buy any more Treasury securities. Cash in the banking system is not the problem the problem is that parts of the credit economy are still not working," he added.

- Watch the full interview with Steve Forbes above.

The Federal Reserve should "aggressively" buy mortgage-backed securities, to get housing sales moving again, and it should buy packages of credit car loans, car loans and other types of credit, as they promised to do, Forbes explained.

"It doesn't have to balloon its balance sheet, but it does have to pump, literally, hundreds of millions of dollars" into this system to get credit going again, he added.

The US regulators plans for reform, which include making the Federal Reserve a systemic regulator for financial institutions and regulating all derivatives contracts are likely to be hotly debated by lawmakers, according to Forbes.

"In terms of regulation it is a bit ironic they're still going to put new powers in the Federal Reserve, which is an agency that, one, didn't exercise proper oversight over the banking system that it had already under its purview and its lousy monetary policy in 2003 and 2004, when it printed all this excess money, made the bubble possible. I think this is going to be really debated by the US Congress," Forbes said.

On the economy, he said the worst of the recession was over and the financial markets had recovered from the lows hit in March, but the financial system was still not functioning properly as there was very little credit available for small companies and consumers.