Fed Does What Can’t Be Done Directly in Twist of Political Fate
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Federal Reserve Chairman Ben S. Bernanke has found in Operation Twist a way to expand his record monetary stimulus without provoking his critics.
Through Twist, the Fed sells short-term holdings and buys longer-term debt to spur the economy by cutting borrowing costs without increasing its balance sheet. The June 20 decision to extend the program hasn’t generated much controversy so far, unlike the Fed’s second round of asset purchases, announced in 2010, which sparked the worst political backlash in three decades as Republicans warned it risked accelerating inflation.