Fed’s Fisher: “We are deeply submerged in a vast fiscal chasm”


Vivien Lou Chen
Bloomberg
September 26, 2008

Dallas Federal Reserve Bank President Richard Fisher said the U.S. Treasury’s proposed $700 billion rescue of financial institutions would be “a critical first step” toward calming markets even while adding to the U.S. government’s fiscal burden.

The plan by Treasury Secretary Henry Paulson to buy troubled assets from financial institutions “is an incremental addition to the federal government ledger,” Fisher said today in a speech in New York. Existing federal obligations in Medicare and Social Security mean “we are deeply submerged in a vast fiscal chasm,” he said.

Fisher made the comments as the central bank expands its role in the biggest government intrusion into markets since the New Deal, with Fed Chairman Ben S. Bernanke trying to persuade Congress to approve Paulson’s bailout plan.

Bernanke has already cut the benchmark interest rate at the most aggressive pace in two decades, invoked emergency powers to loan to securities firms and pumped billions of dollars into banks to try to restore liquidity. Also, the central bank loaned $85 billion this month to American International Group Inc.

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