Prime Highlights
- U.S. Treasury Secretary Scott Bessent urges a thorough review of the Federal Reserve’s non-monetary operations.
- He cautions that the Fed’s encroachment could jeopardize its autonomy and effectiveness at monetary policy.
Key Facts
- Bessent invokes “mission creep” as the Fed ventures beyond its central mission, raising institutional concerns.
- He also questions the timing of the Fed’s $2.5 billion headquarters overhaul during ongoing operating losses.
Key Background
Scott Bessent, the U.S. Treasury Secretary, has long made the case in public for a comprehensive overhaul of Federal Reserve non-monetary operations. In a recent interview and social media statement, Bessent worried that the central bank is getting off track from its core mandate of implementing monetary policy. He believes that the incursion into activities such as regulatory policy, infrastructure spending, and in-house capital projects jeopardizes the very independence which enables the Fed to make decisions free from political influence.
Target of his criticism is the Federal Reserve’s $2.5 billion construction of a rebuilt Washington, D.C., headquarters. Bessent wondered why so expensive a venture was undertaken during the era of unrelenting operating losses. He did not ask for specific investigators but pointed to a root-and-branch institutional review such that the Fed’s internal governance, financial conservatism, and priorities are held up for scrutiny.
His remarks follow wider political pressure on the Fed from the likes of former President Donald Trump and Trump supporters. Trump has repeatedly railed against Fed Chairman Jerome Powell for opposing steep rate reductions. Although Bessent declined to support the ouster of Powell, his language follows increasing ire from politicians with the Fed’s expanding reach.
Bessent likened the Fed’s position to that of the FAA in failing to regulate the skies, suggesting that analogous kinds of systemic risk were building up at the central bank. Bessent contended that allowing the Fed to have carte blanche outside its monetary mandate would jeopardize financial stability and public confidence. This demand for change can prompt Congress or regulators to examine the Federal Reserve’s statutory authority and reform the way the institution operates in the future.
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