Former U.S. Treasury Secretary Hank Paulson on Thursday defended the Federal Reserve's efforts to stimulate the economy, but argued its policies of bond buying and near-zero interest rates can't last forever. What's needed to jump-start the economy now is bipartisanship in Congress, he said.
The markets have experienced a broad selloff since Fed Chairman Ben Bernanke told Congress last week the central bank could reduce its $85 billion in monthly purchases of Treasurys and agency mortgages this year. But to Paulson, it seems the selloff came as no surprise.
"When you have a big, ugly problem, there's never going to be a neat, elegant solution that is totally painless or without a cost and to me it's just completely unrealistic to assume that those programs could be phased out without some market volatility and some pain," Paulson told CNBC's Maria Bartiromo on "Closing Bell." "Market participants, some of them, are addicted to these abnormally low interest rates."
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The Fed seems to be the "only game in town," Paulson complained, meaning it's the biggest driver of both the markets and economy alike. It will take bipartisanship in Congress to lessen the dependency on the Fed and grow the economy by more than 2 percent, he said.