GOP lawmakers warn Bernanke against QE 3

House Republican lawmakers are warning Federal Reserve Chairman Ben Bernanke to refrain from another round of quantitative easing, which they say could accelerate inflation.
Bernanke is scheduled to speak at a Fed conference in Jackson Hole, Wyo., Friday morning at 10 a.m.


At the same conference last year, Bernanke launched the second round of the Fed’s Treasury purchasing program, which became known as QE2.
Wall Street investors, buffeted by the summer’s volatile stock markets, have been eagerly awaiting a Fed decision to roll out a third round of quantitative easing, which would likely pump up equity prices. The second round of quantitative easing ran out in June.

Wall Street wants Bernanke to announce a large-scale purchase of U.S. Treasuries, which would infuse banks with cash and create incentive to buy stocks by lowering the yield on long-term bonds.
House lawmakers, however, say they were not impressed by the previous round of easing and don’t want Bernanke to flood more dollars into the economy.
“I think it’s a bad idea. Just printing more money and throwing it out there is devaluing the money we already have,” said Rep. Steve Chabot (R-Ohio) in an interview. “Over the long term it’s inflationary. It sends the wrong message.”
Rep. Paul GosarPaul Anthony GosarGOP's embrace of Trump's false claims creates new perils Domestic extremists return to the Capitol Republicans keep distance from 'Justice for J6' rally MORE (R-Ariz.) said he doesn’t think another round of easing is a good idea.
“QE is flooding the market with more money and it’s unacceptable,” he said.
Gosar said the Fed should instead ease up on audits of small community banks and give them more freedom to make loans to businesses.
“All we’ve seen here is restriction and constriction with community banks,” Gosar said. “They can’t give money unless the Fed allows it. Allowing a person to get a loan is not made at the local level.”
Gosar said he has set up meetings between local businesses and community banks to ease tensions between the two groups by explaining that federal restriction is responsible for tight credit in his district.
Some lawmakers have grown disgruntled with the Fed because they believe it has become the ally of big financial institutions while not doing enough to help community banks and small businesses.
Texas Gov. Rick Perry, a contender for the White House in 2012, spoke to the growing resentment toward the Fed in rural America when he said additional quantitative easing would border on treason.
"If this guy prints more money between now and the election, I don't know what y'all would do to him in Iowa, but we would treat him pretty ugly down in Texas," Perry said during a campaign stop in Cedar Rapids, Iowa.
Inflation has become a core concern of many conservatives across the country. Indicative of this, Goldline International has become a major advertiser for conservative talk-show host Glenn Beck.
Opposition to a third round of quantitative easing has spread beyond the Tea Party to establishment Republicans and even some Democrats.
GOP presidential candidate Mitt Romney warned it could increase inflation.
"Another round of quantitative easing is not the solution for the economy, and could mean inflation down the road," Romney told Fox News on Monday. "It's not the right thing to do."
Inflation accelerated last month as consumer prices increased 0.5 percent in July, according to the Bureau of Labor Statistics. The Consumer Price Index increased 3.6 percent over the previous 12 months.


“Bernanke is clearly on notice that a decision to enter into QE3 would be very poorly received in political quarters,” said William Gallston, senior fellow at the Brookings Institution.
“He must be asking himself how effective another round of quantitative easing would be when long-term interest rates have been driven down so quickly, so substantially,” he said. “If you gun the engine while the gears are in neutral, all you’re doing is blowing exhaust out the back and not moving the car.”
Galston said quantitative easing has become a partisan issue to some extent because of the vociferous opposition of libertarian and Tea Party Republicans. But he said some Democrats are skeptical as well.
“There are pockets of strong feelings in both parties,” said Galston, a former policy adviser to President Clinton and Democratic presidential candidates.
Rep. Tom Reed (R-N.Y.) said new stimulus from the Fed would only serve as temporary economic relief.  He said cutting the federal deficit and repealing regulations would serve as a better strategy for boosting the economy by giving more certainty to businesses.
“I don’t believe in any type of quantitative easing policy, I’m not supportive of that,” he said.
“It has too many risks associated with that,” he added, citing inflation as a potential consequence. “It’s trying to print away the problem. It’s more of a Band-Aid.”