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Illustration: Aïda Amer/Axios

Several officials at the Fed are beginning to worry about asset bubbles and excessive risk-taking as a result of their extraordinary policy interventions, James Politi writes for the Financial Times, citing interviews with multiple Fed presidents and members of the Board of Governors.

Details: Some are now pushing for "tougher financial regulation" as concerns grow that monetary policy is "encouraging behavior detrimental to economic recovery and creating pressure for additional bailouts."

What they're saying: “I don’t know what the best policy solution is, but I know we can’t just keep doing what we’ve been doing,” Minneapolis Fed president Neel Kashkari told the FT.

  • “As soon as there’s a risk that hits, everybody flees and the Federal Reserve has to step in and bail out that market, and that’s crazy. And we need to take a hard look at that.”

Boston Fed president Eric Rosengren called for a “rethink” of “financial stability” issues in the U.S., and Fed governor Lael Brainard said in a speech last month that expectations of extended low-interest rates were boosting “imbalances” in the U.S. financial system, Politi reported.

Why it matters: Economists, strategists and fund managers on Wall Street have said for months that the Fed has effectively killed price discovery by "nationalizing" the bond market with its actions and is artificially holding up the price of financial assets.

  • That has elevated U.S. economic inequality, and while market participants have cheered, the Fed's popularity has sunk among most Americans.
  • Much of the U.S. economy, including jobs and spending at small businesses and firms not dedicated to e-commerce, continues to be weak.

The big picture: The latest comments from Brainard, Rosengren, Kashkari and others suggest that influential members of the Fed's policy-setting committee may be pushing back against the so-called Fed put — a belief among investors that if stock prices fall enough, the Fed will bail them out by lowering interest rates or by pushing trillions of dollars in liquidity into financial markets through quantitative easing.

  • That has been the underlying principle of bullish stock market strategies over the past decade, including BTFD (Buy The F*cking Dip) and TINA (There Is No Alternative), that have emboldened traders to continue buying U.S. stocks despite grim economic conditions.

But, but, but: The tough talk may simply be a call for someone else to step up as the Fed continues to backstop markets.

  • “For me, monetary policy is a very poor tool to address financial stability risks,” Kashkari told FT.
  • And Rosengren added that the central bank lacks the tools to “stop firms and households” from taking on “excessive leverage.”

Go deeper

Reddit traders look to pummel Wall Street's old guard

Illustration: Sarah Grillo/Axios

Reddit traders are taking on Wall Street pros at their own game with this basic mantra: Stocks will always go up.

Why it matters: Their trades — egged on in Reddit threads — have played a role in historic market activity in recent days.

Miriam Kramer, author of Space
30 mins ago - Science

The suborbital space race heats up

Illustration: Aïda Amer/Axios

Blue Origin and Virgin Galactic are pushing to launch their first paying customers to the edge of space.

Why it matters: If the two companies succeed, it will open up a new market in the space industry, one focused on consumer-driven demand for expensive trips to suborbital space.

No one in Washington is happy with Facebook

Illustration: Sarah Grillo/Axios

The Oversight Board's decision Wednesday to uphold Facebook's suspension of former President Trump found few fans in Washington and exposed the company to a new round of attacks.

Why it matters: While the board urged Facebook back to the drawing board to better define its rules and processes around political speech, political actors on both left and right agree that the social media giant already has too much power.