Asset bubbles like the real estate crisis rocking the economy are a policy concern for the government but not necessarily the Federal Reserve, says Federal Reserve Board Governor Frederic S. Mishkin.
Mishkin, who recently announced he would step down from the Fed, was apparently responding to calls for the Fed to increase regulation of financial institutions in the wake of the credit crunch and mortgage market meltdown.
Other economic observers were somewhat taken aback by Mishkin’s comments.
“He seems to say that monetary policy is simply the setting of short-term, overnight interest rates,” Timothy A. Canova, an international monetary policy expert at the Chapman University School of Law, tells Moneynews.
“Free market ideology gets in the way of sensible regulation.”
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