Oct. 18, 2017
HARRISBURG – The House State Government Committee Tuesday approved legislation authored by Rep. Frank Ryan (R-Lebanon), House Resolution 522, that would require the state Treasury to lobby the federal government to retrieve monies lost due to reckless U.S. Federal Reserve policies since 2008.
“The Federal Reserve’s relentless and unwarranted use of quantitative easing after the housing bubble collapse 2008 resulted in reduced returns on government bonds,” Ryan said. “In Pennsylvania’s case, the loss on bond returns in the past nine years is over $20 billion, and that money should be refunded to Pennsylvania’s taxpayers. Financial entities have a fiduciary duty to their clients and the Federal Reserve failed in this regard and should be required to make restitution.”
Quantitative easing (QE) is a drastic measure used by the Federal Reserve to inject liquidity into a collapsing economy where interest rates are already close to zero, in order to arrest it from free-falling into a downward spiral of economic contraction. However, such drastic action should never be used for such a prolonged time or it will create a stock market that rockets sky high with no actual capital investment or production of goods to back it up.
“Quantitative easing can be a useful tool in the right circumstances for a short period of time,” Ryan said. “But to rely on it for so long has led to increased prices – mostly in financial assets – while promoting risky investing and punishing savers by suppressing bond yields. It has also poisoned the operating environment of successful companies and depressed investment in productive companies.”
Ryan said Pennsylvania’s $76 billion unfunded pension liability would only be around $20 billion dollars lower if QE hadn't been used so aggressively and for so long.
“The Federal Reserve is not a government organization and it cannot claim sovereign immunity from the financial destruction caused by its use of QE,” Ryan said. “I keep trying to wake folks up to the fact that our state is close to fiscal insolvency such as what occurred in Illinois and Detroit. We've got some real dangerous financial issues facing us shortly, and if this thing goes haywire, we'll never be able to pay our liabilities."
House Resolution 522 was reported out of the House State Government Committee by a bipartisan vote of 15-8.
Representative Frank Ryan
101st Legislative District
Pennsylvania House of Representatives
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