The Fed's claim that it can easily withdraw reserves ('a big mop in the back room') is harder than it sounds, especially because unwinding mortgage-backed securities requires selling them, which people will argue raises mortgage rates, and the Fed's purchase of medium-term Treasuries to keep long Treasury rates low and reduce Treasury borrowing costs raises questions about its independence.

factualpending

Speaker

John Taylor

Evidence Quote

they talk like they've got a big mop in the back room they're always like that that metaphor... much easier said than done and I think one reason is the mortgage-backed securities... it's also buying medium term Treasuries to try to keep longer-term Treasury rates low... that raises questions about its independence

Source

John Taylor on the Financial Crisis 07/20/2009EconTalk
Created: 6/15/2026, 9:20:12 AM

My Notes

Loading notes...