Federal Reserver Mulls Issuing Its Own Debt Collateral

The U.S. Federal Reserve is considering issuing its own debt for the first time, the Wall Street Journal said, citing people familiar with the matter.

Fed officials have approached Congress about the move, which could include issuing bills or some other form of debt and would provide the central bank with more flexibility to tackle the financial crisis, the Journal said.

The Fed could not be immediately reached for comment.

The Fed can already print ten times as much money as it holds in marketable treasury securities from the Treasury Department. Giving it the ability to issue its own debt collateral would allow it to print money which is not guaranteed by the US Treasury.

This would also remove the ability of the U.S. Treasury to completely regulate the quantity of money the Federal Reserve can issue. It would enable the Federal Reserve to issue an extra quantity of money at the rate of ten times the amount of promissary notes it is able to sell/issue to buyers.