The Fed Has a Language Challenge

As Janet Yellen prepares to be the next Fed Chair, a laundry list of questions on her priority list and others await her. The next several years likely will prove turbulent. Advising her as a lawyer-gone-public-strategist and decidedly not as an economist, I urge Ms. Yellen to take on the easiest question first. That, of course, is Quantitative Easing, or QE, as the Fed folks call it. QE is bad for the Fed's brand, bad for public trust, and it's bad PR. For most of us who haven't heard of it or don't understand the process, QE involves the Fed buying various forms of debt from banks and private financial institutions. Principally, the Fed is purchasing Treasury bills/notes/bonds and mortgage-backed security paper in the trillions of dollars as a deflation hedge.

QE is neither a quantitative nor an 'easing' term of art for the most important calibrator of the world economy to use. And, in the political/policy world, words and phrases are easily sliced into myriad and negotiable meanings, depending on the interests of the user. To the average pedestrian viewing the QE billboard, the reaction is either, "I have no clue what that means so I'll keep walking," or, "Somebody is trying to hide what's really going on." In the court of public opinion, opacity equals obfuscation. Or, more pointed, if it sounds like BS, it probably is.

With the financial industry amid a "trust" crisis, clarity must be king. If QE is, in fact, sound Fed policy, then please call it something simple, such as a "debt-purchasing program." The Fed and all financial institutions, for that matter, are challenged to make the critical work they do easily understood and accessible, both in terms of language and policy. As non-empirical proof of this, in the law school class I teach, the financial crisis is part of the curriculum, and over the last four years, fewer than 10 percent of the class has understood what the Fed does. And that's after they researched the question. Given the public and political stakes, the Fed and other key financial actors in our global economy must participate actively in this quest for comprehension and fully understand the operational forces that influence it. The alternative is to simply allow today's interpreter of practically anything -- John Stewart -- to do it.