With Jeff Kearns
The Federal Reserve’s zero-interest-rate policy has inspired plenty of criticism from investors, who say low rates punish savers and risk inflation. But comparing Fed Chairman Ben S. Bernanke and other central bankers to a medieval barber played by Steve Martin on Saturday Night Live must be a first.
That’s the analogy that Weston Hicks, the chief executive officer of New York-based insurer Alleghany Corp., drew on to describe the Fed’s efforts to stimulate the economy by lowering interest rates and going on a bond-buying binge that expanded its balance sheet to more than $3 trillion for the first time.
From Hicks’s annual letter to shareholders posted online yesterday:
“Much like Theodoric of York, the medieval barber on `Saturday Night Live’ whose solution to every health problem was more bloodletting, central bankers continue to force liquidity in the banking system without any objective proof that it is helping,” Hicks wrote. “We do know that it isn’t helping retirees, pension funds, or insurance companies, as interest rates are suppressed, penalizing savers to the benefit of the banking system.”
Bernanke has defended the Fed’s policies, saying in October that they’ll spur growth in the economy, which will help savers.
For now, that’s cold comfort for Hicks. If rates stay low, he says Alleghany will start to shift more of its $17.8 billion investment portfolio to stocks rather than bonds.