The extraordinary actions taken by the Fed during the financial crisis were a “problematic exercise in credit allocation,” according to Jeffrey Lacker, president of the Federal Reserve Bank of Richmond, who added that purchases of Treasuries could have created the same “expansion of reserve supply.”

The central bank “could easily manage the supply of monetary assets” using only Treasuries, he said. “While it might sound extreme, I believe that a regime in which the Federal Reserve is restricted to hold only U.S. Treasury securities purchased on the open market is worthy of consideration.”

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