Economists concerned about Fed’s expanding role

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The Federal Reserve has traditionally guided the economy by setting interest rates but stayed out of day-to-day business. However, the economic crisis has changed its role.

Since March, when the Fed stepped in to fill the lending vacuum left by banks and Wall Street firms, officials have been dragged into murky battles over the creditworthiness of industries such as recreational boats, motor homes, rental cars, snowmobiles and farm equipment, according to an article in The New York Times.

A growing number of economists worry that the Fed’s new role poses risks to taxpayers and to the Fed itself. If the Fed cannot extract itself quickly, they warn, the task of allocating credit will become more political and less subject to rigorous economic analysis.

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