Former Insider Kevin Warsh Chides Fed for ‘Late’ Main Street Response

(Bloomberg) -- The Federal Reserve acted with “overwhelming force” to shelter the U.S. economy from Covid-19 but that has not done much to help the real economy so far, said former U.S. central banker Kevin Warsh.

“They seem to be incredibly aggressive even as risk assets are at incredible highs,” Warsh, who stepped down as a Fed governor in 2011, said Wednesday in a Bloomberg Television inverview with Lisa Abramowicz, Jonathan Ferro and Tom Keene. “I wish that same aggressiveness was being felt in the policies they are putting on Main Street.”

The Fed announced its Main Street lending facility in late March and effectively opened it for business on Monday.

Chair Jerome Powell, who appears in a virtual hearing before the House Financial Services Committe later on Wednesday, has called it the most challenging of the nine emergency lending programs it’s unveiled to keep credit flowing during the pandemic.

“In Main Street their policies seem to be late, delayed, cumbersome and frankly not terribly effective,” said Warsh, who served in the George W. Bush White House prior to joining the central bank in 2006 and was among those considered by President Donald Trump for the top Fed job that ultimately went to Powell.

“So the chasm between the aggressiveness to push up risk assets and push down bond spreads doesn’t seem to be matched on Main Street,” he said.

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