The Fed’s Radical Shift Lets Main Street Down

null Jan. 4, 2024 4:39 pm ETFederal Reserve Chairman Jerome Powell holds a press conference in Washington, Dec. 13, 2023. Photo: brendan smialowski/Agence France-Presse/Getty ImagesIn “The Federal Reserve Deserves a Pat on the Back” (op-ed, Dec. 27), John Cochrane praises the “ample reserve” regime at the Fed. There is no one less deserving of praise right now than Chairman Jerome Powell and the Federal Reserve.In contrast to the Fed’s mission, the ample-reserve regime relies on a large balance sheet forever. It has caused a massive misallocation of capital and is a radical shift in how the Fed operates. By growing its balance sheet, the Fed has locked in losses of more than a trillion dollars in the past year alone. Today, the Fed’s balance sheet is $7.7 trillion. That is eight times as high as it was when President Barack Obama took office in 2009.Copyright ©2024 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8Sponsored OffersTurboTax: Up to 10% off on

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The Fed’s Radical Shift Lets Main Street Down

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Jan. 4, 2024 4:39 pm ET

Federal Reserve Chairman Jerome Powell holds a press conference in Washington, Dec. 13, 2023. Photo: brendan smialowski/Agence France-Presse/Getty Images

In “The Federal Reserve Deserves a Pat on the Back” (op-ed, Dec. 27), John Cochrane praises the “ample reserve” regime at the Fed. There is no one less deserving of praise right now than Chairman Jerome Powell and the Federal Reserve.

In contrast to the Fed’s mission, the ample-reserve regime relies on a large balance sheet forever. It has caused a massive misallocation of capital and is a radical shift in how the Fed operates. By growing its balance sheet, the Fed has locked in losses of more than a trillion dollars in the past year alone. Today, the Fed’s balance sheet is $7.7 trillion. That is eight times as high as it was when President Barack Obama took office in 2009.