Stanford economist and former Fed member John Taylor nails the central dilemma presented by the Fed’s aggressive intervention into the financial crisis: legitimation. 

The viability of capitalism, which generates volatility and inequality as a matter of course, depends heavily on the notion of “consent by the governed.” Absent that revolution or chaos fill the vacuum. Taylor notes that the massive buy-in by the Fed has meant, whether intentional or not (certainly not), that the federal government is now making industrial policy choices. 

This is really no different than the “pick the winner” policies that are at the heart of the east Asian model. Thus, the Fed begs the question, who does the picking? 

Presumably the governed…but where are they in the process?