According to Bloomberg, Federal Reserve Bank of Richmond President Jeffrey Lacker said the future of global banks will be shaped by a debate over the institutions' role as lenders of last resort.
Lacker said central banks should avoid channeling credit to specific segments of the economy through rescues or asset-purchase programs. Still, “some writers” say central bank mandates provide a large role in financial stability, “in which all available tools, both monetary and credit policy, are used to minimize financial system ‘disruptions,’” he said.
“Aggressive use of a central bank’s asset portfolio to channel credit to particular economic sectors or entities threatens dragging the central bank into distributional politics and places that governance arrangement at risk,” Lacker said today in Newport News, Virginia.
