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US banker sees economy improving

By Wu Jiayin | April 23, 2009, Thursday | Print Edition

SHANGHAI Daily reporter Wu Jiayin joined a group interview of Richard W. Fisher, president and CEO of the Federal Reserve Bank of Dallas, and a member of the Federal Open Market Committee, in Shanghai on April 18. The following are excerpts from the interview.

1. How soon will the US economy recover from the crisis?

Fisher: Our economy is gradually improving. We had a very bad fourth quarter last year. We have yet to tabulate our first quarter numbers. At sometime in 2010 we will start to have positive economic growth.

Much depends on the restoration of the credit markets, (which is) something that we at the central bank have the responsibility for, and we sense and we feel that the credit markets are achieving a better tone and are getting stronger.

The fiscal stimulus put forward by the US Congress at the request of the president is designed to stimulate both short-term economic activity and long-term structural change.



2. The US Federal Reserve announced last month that it would purchase US$300 billion of long-term government bonds. Will this cause the devaluation of dollars?

Fisher: At the last Federal Open Market Committee, we decided to purchase US$300 billion in the US treasuries over six months and to have a total purchase volume of US$1.25 trillion in mortgage-backed securities.

We have been purchasing mortgage-backed securities for a longer period. And thus far, under that program, we've purchased US$68 billion.

The purpose of the mortgage purchases is to drive down the mortgage rate, and indeed we've done so to provide some stimulus to the housing market.

As to the purchase of US$300 billion US treasuries, since March 25, we've bought roughly a little over US$40 billion in US treasuries. And the purpose of that is to improve the tone in the overall credit market in the United States. The purpose of the program is not to monetize a fiscal policy.

3. What's your comment on China's call for strengthened international financial regulation?

Fisher: We have to revise our supervision system in the US and we're in the middle of doing so.

The ultimate authorities on that will be the lawmakers in the US. Right now we have too many agencies. It's very confusing. And they don't address modern needs. So even without the comments of others, we are undertaking a reform of our regulatory system.

The reality is that each country is a sovereign authority. So we have to be realistic as to what the limits are. The one thing that needs to be done and is actually being done is greater exchange of information.

Your sovereign authorities, just like our sovereign authorities, have a desire for financial stability. All of us are aware of the fact that we need to supervise and regulate the financial system within our countries in a responsible way.

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