Dallas Fed's Fisher Comments on QE3

Earlier, Dallas Federal Reserve's Governor Richard Fisher appeared on CNBC Squawk Box and fielded a number of questions. Fisher stated that he would be pleased when the Fed is at the point where it can stop using emergency tools (quantitative easing) and go back to simply adjusting interest rates. Fisher noted that the US economy is improved, but there is still too much unemployment, and the unemployed are remaining out of the workforce for far too long. Fisher noted that inflation is currently staying right around 2%. With oil prices on the move, some investors may anticipate that rate to soon increase. Fisher stated that he was not sure how oil prices would have an affect. While Fisher was not a big fan of QE2, he stated that the US economy managed to avoid a double dip recession. Fisher stated that the Fed's policy was a part of that. According to Fisher, the other part was the power of the US private sector, which Fisher characterized as the best in the world. Responding to an earlier comment—in which Fisher called QE3 a "Wall Street Fantasy"—he noted that he was the only member of the FOMC to have managed money before he joined the Fed. Fisher reiterated that it is not the Fed's job to bailout Wall Street. Fisher stated that he viewed rate promise as meaning that rates will stay low for as long as possible. He believes that the Fed's intention is to keep things as they are until they see improvement in the economy. Fisher harkened back to his days as a money manager when he noted that a good investor will buy into an entity and get returns based on the real economy. He said that it is reasonable to assume that the Fed will not buy MBS forever. Fisher also touched on his home state of Texas, noting that it has an ideal government structure. He said that the Texas model is one of incentivizing business. Fisher admitted that oil prices are a net benefit to the state, but only 8-10% of Texas' GDP and 2% of its workforce is employed in energy. Recently, some commentators and other members of the Fed have stated that the FOMC could help the economy further by purchasing additional MBS to clear the housing market. Fisher was dismissive of this argument, noting that mortgage rates are at an all-time low. He stated that other factors may be playing a larger role than people believed—such as a shadow inventory buildup from the present legal foreclosure mess.