Hard to tell from how calm and quiet everyone is, but this hearing on the Fed's refusal to grant relief to state and local governments is just wild. The Fed's Kent Hishew has no answers. https://coc.senate.gov/municipal-liquidity-facility

Hishew says he agrees that state and local governments need help and then says "we believe monetary policy has limited capacity to do that."

He's right that fiscal aid from the federal government would be better than a loan from the Fed. But fiscal help isn't coming, and the Fed has a $500 billion lending facility and it basically isn't using it.

And the Fed can set whatever terms it wants for that program. 100-year loan terms, interest rates at zero, whatever. If the Fed wanted to help, it would.

Most Fed officials are uncomfortable with the idea that what they do has a political dimension. They like to think of themselves as neutral, technical policymakers just figuring out what works.

But managing the economy is inescapably political. Choosing to help large corporations and not state governments is a political choice. But the Fed presents its political decision as a technical one.

If the Fed takes its full employment mandate seriously and it can see state and local government austerity coming at a time when the unemployment rate is 8.4%, it would be thinking creatively about how to prevent that austerity.

*Kent Hiteshew, not Hishew

Very hard not to be impressed with @BharatRamamurti at this hearing. Thorough mastery of the issues, doesn't accept boilerplate answers from Hiteshew, doesn't let Pat Toomey dictate the terms of debate.