Sheila Bair, the former head of the FDIC during the financial crisis, said the Federal Reserve contributes to inequality in the U.S. and that monetary policy, which largely helps the wealthy, fails to adequately trickle down to other demographics.

“I think it would be good for the Fed to acknowledge that and try to find better ways to use their tools in a way that doesn’t exacerbate the problem,” Bair said on Yahoo Finance’s On The Move.

Bair was quick to point out the benefits of what the Fed has done in response to the sharp disruption in the economy, but said its inflation of asset prices “doesn’t really trickle down to labor markets.”

After the 2008 financial crisis, Bair said, the U.S. saw a similar narrative in the recovery with stagnant wage growth as the stock market soared. It took 10 years for lower- and middle-income families to see gains, Bair said – and that was “despite low interest rates, not because of it.”

Bair criticized zero interest rate policy as a driver of inequality, something that Fed Chair Jay Powell pushed back on recently, saying that the Federal Reserve’s policies “absolutely” don’t add to inequality, and that the Fed’s response has been to help workers and save jobs.

But with interest rates low, asset prices go up, widening the gap between the people who own assets and those who don’t. Only a slight majority of people in the U.S. own stocks.

The Fed chair may not agree that the Fed contributes to inequality, but former New York Fed President William Dudley does. Recently, he called fighting inequality and rescuing the economy mutually exclusive.

“The Fed's choices: not have a recovery and have less inequality or have a recovery buoying financial asset prices and more inequality,” Dudley said on Bloomberg. “The Fed's tools are just not suited to address the inequality problem.”

The hosts asked whether he was exaggerating the binary nature of the two. “I think it is pretty much that binary,” Dudley said.

How to stimulate the economy fairly

Bair gave the Federal Reserve a lot of credit for acting swiftly, calling the efforts “heroic.” But she said she sees resistance to other ways to get people money.

“If they’re going to heat up the printing press, where is the money going now? It’s going into financial markets, benefitting banks and large corporations that use the bond markets to fund themselves,” said Bair.

The Fed is “trying to get it out,” said Bair, “but the tools that they have now just are not equipped to get it down to Main Street in my view.”

“If they’re going to print money, print it and send it directly to households,” she said.