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Plosser: Fed overstepped in buying mortgage-backed securities

housingwire.comMar 26, 2012

By Kerri Panchuk

Federal Reserve Bank of Philadelphia CEO Charles Plosser is not a fan of the Fed buying mortgage-backed securities.

In a speech to the Global Society of Fellows of the Global Interdependence Center in Paris, Plosser said central banks should be wary of continuing down a path in which they step too far into the zone of taking on fiscal policy. He cited the Fed's effort to assist the fledgling housing market through the acquisition of mortgage-backed securities as one example.

"These credit allocations have not only breached the traditional boundaries between fiscal and monetary policy, they have generated pointed public criticisms of the Fed," Plosser said.

Plosser said having a concentration of housing securities on the Fed's balance sheet is a type of credit allocation and pushes the Fed well beyond the boundary of monetary policy into fiscal policy.

Plosser suggested central banks establish a clear divide between monetary policies enacted by central banks and fiscal policies enacted by Congress. He suggested it makes sense for central banks to focus on price stability, while allowing fiscal policymakers to handle other fiscal initiatives.

The Fed's current policy is to focus on both price stability and fostering employment.

"The ability of a central bank to maintain price stability can also be undermined when the central bank itself ventures into the realm of fiscal policy. History teaches us that unless governments are constrained institutionally or constitutionally, they often resort to the printing press to try to escape what appear to be intractable budget problems," he said.

"And the budget problems faced by many governments today are, indeed, challenging. But history also teaches us that resorting to the printing press in lieu of making tough fiscal choices is a recipe for creating substantial inflation and, in some cases, hyperinflation," he added.

Back to March 2012 Archive

CFLA was founded by the Nation's Leading Foreclosure Defense Attorneys back in 2007 to serve the Foreclosure Defense Industry and fight pervasive Bank Fraud. Since opening our virtual doors, CFLA has rapidly expanded to become the premier online legal destination for small businesses and consumers. But as the company continues to grow, we're careful to hold true to our original vision. For us, putting the law within reach of millions of people is more than just a novel idea—it's the founding principle, just ask Andrew P. Lehman, J.D.. With convenient locations in Houston and Los Angeles, you can contact Our National Account Specialist and General Manager / Member Damion W. Emholtz at 888-758-2352 for a free Mortgage Fraud Analysis or to obtain samples of work product, including cutting edge Bloomberg Securitization Audits, Litigation Support, Quiet Title Packages, and for more information about our Nationally Accredited and U.S. Department of Education Approved "Mortgage Securitization Analyst Training Certification" Classes (3 days) 24 hours for approved CLE & MCLE Credit (Now Available Online).

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