Fixing the Economy with Financial Experiments

"Faces" exhbition, National Press Club

 National Press Club (Photo credit: Michael Foley Photography)

Financial industry experts met at the National Press Club in D.C. this week to discuss the U.S. economy and prospects for stronger economic growth.

Mohamed El-Erian, Chief Executive and Chief Investment Officer of PIMCO, suggested the potential tapering of the Federal Reserve’s quantitative easing program would push the Federal Reserve into uncharted territory. “The one thing to remember,” El-Erian said, “is that we are in a period where the Fed, again not by choice but by necessity, is using experimental policies that have not been tested. It is like a doctor that gives you a medication because he or she has to do so but it hasn’t been completely tested.”

Stanford economist John Taylor, a prominent Fed critic who has long been on the short list of potential Fed chairmen in a future Republican administration, blamed the uncertainty surrounding Dodd-Frank for hindering economic growth.

“One of the things that I think we need to face up to is we’ve had a lot of regulatory increases the past few years,” Taylor said. “Dodd-Frank has a huge number of regulations. Many of the rules haven’t been written yet.  Let’s face it: that is a drag, that uncertainty. What this economy really needs is predictability."

Sheila Bair, former chair of the FDIC, said the post-crisis financial system is “certainly safer,” although “it’s not as safe as it should be.” Bair noted that “some of the rules that we really need to have a more stable financial system have not been finalized yet” and expressed frustration with the slow implementation of Dodd-Frank reform measures. “I get frustrated with all the pushback on getting the rules finalized because at the end of the day… it’s in the financial services industry’s interest to get these rules done.”