Let me explain: Fed's Lacker says dissent stems from MBS strategy

Jeffrey Lacker, president of the Federal Reserve Bank of Richmond.
Justin Solomon | CNBC

Richmond Fed President Jeffrey Lacker said in a statement on Friday that his dissent from the Federal Reserve's so called exit strategy plan stemmed from its approach toward mortgage-backed securities.

The Fed announced on Wednesday a new set of plans related to whittling down its $4.4 trillion balance sheet and moving to a more normal monetary policy. As part of its plan, the policy-setting Federal Open Market Committee said it currently does not anticipate selling agency mortgage-backed securities as part of the normalization process. Limited sales may be warranted in the future, it said.

Lacker has previously opposed the Fed's purchase of mortgage-backed securities (MBS) because he feels it singles out a certain sector and gives it an advantage. He repeated that view on Friday.

"I believe this approach unnecessarily prolongs our interference in the allocation of credit,'' Lacker said. "While this would favor home mortgage borrowers, it tilts the playing field against other borrowing by consumers.''

—By Reuters