Writes veteran bank analyst Richard X. Bove at Ladenberg Thalmann & Co.: "The Federal Reserve is considering issuing debt. This is no good... The Federal Reserve can print money whenever it chooses... The only reason that the Fed would stop using the printing press to fund its activities is if the organization believed that it was printing too much money... This may be the case. M-1 (the money supply) may have jumped by 41% quarter-over-quarter.

"Money supply is soaring because the Fed has committed itself to a series of programs to aid the troubled financial sector. These programs are eating up hundreds of billions of dollars monthly. Thus, the Fed may feel that it needs more money but it cannot print the funds because it will set off an inflation that it cannot control.

"By issuing debt, the Fed avoids the risk of hyper-inflation. However, it creates other problems. Fed debt would take precedence over the Treasury debt in the markets. The Treasury can call on its taxing powers to fund its debt, but at the moment the Treasury is issuing debt to pay its debt. At some point this Ponzi scheme must end.

"The Fed on the other hand would never be faced with a problem in paying its debt. In this battle between the Fed and the Treasury to get new funds, the private sector is left out.... Thus, rates go up in the private markets shutting out borrowers and slowing the economy. The Fed must stay out of the game... Congress should not allow it."