Dallas Fed's Fisher: Wall Street Has QE3 'Fetish'

NEW YORK ( TheStreet) -- Wall Street has an addiction to monetary easing, Dallas Federal Reserve Bank President Richard Fisher said in a speech Monday.

"Trillions of dollars are lying fallow, not being employed in the real economy," Fisher said in remarks to the Dallas Chamber of Commerce. "Yet financial market operators keep looking and hoping for more.

"Why? I think it may be because they have become hooked on the monetary morphine we provided when we performed massive reconstructive surgery, rescuing the economy from the Financial Panic of 2008-09, and then kept the medication in the financial bloodstream to ensure recovery.

Dallas Fed President Richard Fisher

"I personally see no need to administer additional doses unless the patient goes into postoperative decline," Fisher continued. "I would suggest to you that, if the data continue to improve, however gradually, the markets should begin preparing themselves for the good Dr. Fed to wean them from their dependency rather than administer further dosage."

Fisher said the liquidity provided by the Federal Reserve's quantitative easing program hasn't found its way into the economy sufficiently. He said the Fed has more than $1.6 trillion of U.S. Treasury securities and almost $848 billion in mortgage-backed securities on its balance sheet.

"When we purchased those securities, we injected money into the system," he said. "Most of that money and more has accumulated on the sidelines: More than $1.5 trillion in excess reserves sit on deposit at the 12 Federal Reserve banks, including the Dallas Fed, for which we pay private banks a measly 25 basis points in interest. A copious amount is being harbored by nondepository financial institutions, and another $2 trillion is sitting in the cash coffers of nonfinancial businesses."

On the economy, Fisher's outlook is tempered, saying said that although economic data show improving growth and prospects for job creation in 2012, the economy "remains constrained by the fiscal and regulatory misfeasance of Congress and the executive branch and is subject to a now well-known, and likely well-discounted, list of possible exogenous shocks -- the so-called "tail risks" -- posed by possible developments of different sorts in the Middle East, Europe, China and elsewhere."

Speaking of China, U.S. stocks fell on Monday in response to a lowered economic outlook. Chinese Premier Wen Jiabao reduced China's 2012 economic growth target to 7.5%, which is an eight-year low, as the nation copes with high inflation.