Federal Reserve officials were told in December 2008 that they would have to buy “very large” quantities of U.S. Treasury and housing-agency debt to have an impact on the economy as they considered alternatives to cutting interest rates that were heading toward zero.
When James Tobin joined President John F. Kennedy’s administration in 1961, the U.S. economy was struggling to recover from its third recession in seven years. As a member of Kennedy’s Council of Economic Advisers, the Yale University professor put his theoretical research on asset markets to work in fashioning a novel strategy -- nicknamed Operation Twist -- to reduce long-term interest rates.
The Federal Reserve will make greater use of its reverse-repurchase agreement facility while policy makers shift focus to rate guidance from asset purchases, according to the central bank’s former markets group head.
Mitt Romney is shunning the monetary policy views of one of his top advisers, Harvard University’s Greg Mankiw, who has expressed support for Federal Reserve Chairman Ben S. Bernanke and his record stimulus.