Republican members of Congress on Wednesday criticized the Federal Reserve's decision to buy $600 billion in bonds in an effort to spur the U.S. economy. In a letter to Bernanke, GOP Congressional leaders said the Fed's second qualitative-easing program, commonly known as QE2, could result in "artificial asset bubbles" and long-term inflation.
The news comes only hours after Fed Chairman Ben Bernanke defended the policy before the Senate Banking Committee. He said the program would encourage business investment and could create as many as 700,000 jobs over two years, the Associated Press reported.
Beyond the Senate, other officials also continue to debate QE2. Nearly two dozen economists, including former John McCain advisor Douglas Holtz-Eakin and ex-Treasury official John Taylor, have criticized Bernanke in advertisements in The New York Times and The Wall Street Journal this week.
Last week, Federal Reserve Governor Kevin Warsh said the government's decision to buy up bonds -- at a time when the dollar is weakening and commodity prices are rising -- could cause longer term inflation. The government may be better off reforming the tax code to spur companies to boost investment, he said.