Economic Quarterly

An accord for Fed credit policy should supplement the monetary policy Accord of 1951 and should be based on three principles: (1) credit policy should not fund insolvent institutions, (2) credit policy should not fund expenditures that ought to get congressional authorization, and (3) Congress should not direct the Fed to transfer assets to the Treasury to reduce the federal deficit. The proposed accord is discussed with regard to three Fed credit policies: liquidity assistance to depository institutions, sterilized foreign exchange operations, and the transfer of Fed surplus to the Treasury.