Hedge fund manager Dan Arbess thinks the Federal Reserve should use its 'printing press' to funnel money directly to the Treasury instead of simply buying more bonds

Speaking at the Milken Institute Global Conference Wednesday, Arbess said that Fed chairman Ben Bernanke could do a better job at keeping his "Helicopter Ben" nickname. In case you've forgotten, Bernanke was given that moniker during the financial crisis when he suggested dropping money from a helicopter to fight deflation.

Arbess knows debt. He's sometimes called a vulture investor since his multibillion dollar hedge fund Xerion invests in troubled companies around the world.

He said the Fed is seeing diminishing returns even though it continues to increase the size of its balance sheet.

"The growth of the money supply has been anemic," said Arbess. Money is sitting in banks instead of making it back into the economy, he said, noting "Quantitative easing is starting to reach its limits."

Here's where "overt monetary finance" or "helicopter money" comes in, said Arbess, explaining that the Fed could bypass fiscal policies that are currently hurting the economy, such as the sequester, and give money directly to the Treasury.

But that may go against the Fed's mandate. The central bank is strictly tasked with using monetary policy to fight inflation and high unemployment.

Arbess said it's the government that's the problem. The lack of fiscal of policy has been preventing the Fed from achieving its goals.

Congress has been worried about whether it has too much debt or too little but has done little to put the economy on a growth path.

Bernanke said pretty much the same thing Wednesday. The Fed released its monetary policy statement during Arbess' panel, and it explicitly criticized the government for "restraining economic growth."

Related: Federal Reserve sticks with stimulus

In a note to investors, BTIG's chief global strategist Dan Greenhaus said Bernanke has "come as close as any Fed chairman to outright criticism of policymakers."

Arbess was also one of a number of top executives at the Milken Conference to suggest the Fed has reached the limits of what it can do with its current toolbox.

Adding a new tool to help the government cut taxes and invest in projects that would bolster growth without adding to the nearly $17 trillion of U.S. debt sounds tempting but Arbess also pointed out that it could be dangerous.

"The obvious objection is that we will lose all control of our ability to manage the economy," he said. Congress might see few reasons to rein in spending if the Fed will pay its bills.

Arbess said the Fed could help staunch some of those concerns by tying funding to specific GDP growth and inflation targets.

But runaway inflation would still be a big concern, he said.

Economist and author Niall Ferguson agreed. He said history shows such a move by the Fed would likely produce excessive inflation.

And in what might be the harshest commentary on just how worried people are about the Fed's current policies, a panel that included Ferguson, venture capitalist Peter Thiel and two hedge fund managers weren't dismissive of Arbess' proposal, and he certainly wasn't laughed off the stage.