The Fed has outsourced monetary policy and lost control of the economy, former White House advisor says

• The Federal Reserve is outsourcing monetary policy, former White House adviser Gary Cohn said.
• It's betting that tighter lending in the banking sector will act as a brake on the economy, he told CNBC.
• But this may lead to a recession, as businesses are unable to expand without borrowing.

The Federal Reserve has shifted some of the task of slowing the economy to the banking sector, former White House economic advisor Gary Cohn said on Thursday.

The central bank raised rates by a quarter point Wednesday, but Chairman Jerome Powell also acknowledged that if credit tightens across the broader financial system, then the Fed may not have to do as much tightening with its monetary policy.