Donald Lambro

WASHINGTON -- The growing backlash against Fed Chairman Ben Bernanke's second quantitative easing, dubbed QE2, is raising long overdue complaints about its role in economic policymaking.

The Fed's sweeping second purchase of U.S. Treasury bonds to pump more money into the U.S. banking system doesn't seem to be working quite like QE1, which helped end the financial panic that threatened the economy's major financial institutions.

The aim of the $600 billion QE2 is to stimulate the anemic U.S. economy by purchasing Treasury securities to bring down long-term interest rates. But interest rates rose in response to the Fed's bond-buying initiative (the 10-year Treasury yields jumped to 2.95 percent Monday) and few -- outside of the Fed's Democratic cheerleaders -- expect it to unlock needed investment capital, increase economic growth or reduce the recession-level jobless rate. "Governments across the globe and even Fed officials have expressed concerns about the impact of the bond-buying effort and doubts about whether it will actually help the U.S. economy," writes Deborah Lynn Blumberg in the Wall Street Journal.

Obama took a beating at the G-20 economic summit in Seoul last week from critics who said he was in no position to criticize China for currency manipulation when the Fed was pumping hundreds of billions of dollars into the U.S. economy to lower the value of the dollar and improve export sales. Within the Fed itself, there is a growing division among the board of governors over Bernanke's policy.

"I am less optimistic than some that additional asset purchases will have significant, durable benefits for the real economy," Fed governor Kevin Warsh said in a speech last week that was the talk of the financial community and shook Wall Street.

Home mortgage interest rates are already low, thanks to the Fed's earlier intervention, but the housing industry remains weak, foreclosures continue to rise and fewer homebuyers are entering the market.

Much is being made by the news media in the spurt of retail hiring for the Christmas season, but these are temporary jobs that will end when the holidays are over. The private sector job market is still in critical condition heading into 2011 and is unlikely to improve anytime soon.

Increasingly, critics are questioning the Fed's widening role in the economy. Yes it should maintain pricing stability, low inflation and regulate the money supply, but monetary policy is not going to pull this over-regulated, over-taxed, under-invested economy out of the doldrums.

Donald Lambro

Donald Lambro is chief political correspondent for The Washington Times.