Stanley Fischer, vice chairman of the Federal Reserve, has been tapped to head the Fed's new financial stability committee. In recent speeches both Mr. Fischer and Fed Chair Janet Yellen have argued that so-called macroprudential regulation can prevent asset bubbles from erupting while the Fed maintains near-zero interest rates. There is not much evidence that these policies prevent financial bubbles. But there is great risk in allowing a small group of unelected technocrats to determine the allocation of credit in the U.S. economy.

Macroprudential...