"The behavior of Congress this week, however, has added another obstacle to our economic recovery: The risk that
elected officials will now politicize the [Fed] and compromise its independence. ... The impulse to use Mr. Bernanke as a political punching bag raises the specter that, instead of doing the right thing, Congress may seek to pressure the Fed to print its way out of this crisis. We know from history that when fiscal authorities attempt to monetize their debts, the result in inevitably inflation. ... Other congressional initiatives put forward would make the presidents of the country's 12 Federal Reserve banks--and even the chairman of their boards--subject to presidential appointment and Senate confirmation. ...
We are hired and fired by nine-member boards of directors that represent the financial institutions and stakeholders of our respective districts. ... In my capacity as president of the Dallas Fed, I represent Main Street--not Wall Street", my emphasis, Richard Fisher (RF) at the
WSJ, 26 January 2010, link:
http://online.wsj.com/article/SB10001424052748703808904575025042648895592.html.
"[RF] raises important issues regarding efforts by some to influence [Fed] policy ... . But he must understand the political backlash against the central bank is partly of its own making. ... Ben Bernanke ... has given the appearance of making the Fed a division of the Treasury. That has politicized the Fed more than anything its critics could do. The only protection from political interference is a monetary rule. The gold standard was one such rule", Gerald O'Driscoll letter to the WSJ, 30 January 2010. Mr. Fisher indicates that he doesn't know that the Fed is already politicized", Don Crook letter to the WSJ, 30 January 2010, link: http://online.wsj.com/article/SB10001424052748704094304575029452385284206.html.
RF is Dallas Fed president. This is nonsense. Congress created the Fed and can kill it. RF talks of "independence". From who? For what? "Nine-member boards of directors" hire and fire Fed heads. Do the Fed heads "represent the financial institutions ... of their respective districts"? Who represents the public? Kill the Fed.
Yes O'Driscoll and Crook.
2 comments:
The Fed has made itself the global "lender of last resort" since the dollar is the world reserve currency.
Benanke plays a game of trying to appease many constituencies.
For Congress he has riffed a bunch of voodoo. As long as the fiscal account can be endlessly overdrawn they are happy punting problems into the future.
For Pres O he has tamped down numerous fires. Although he has just shifted the risk to other battlefields.
The Chinese have had enough of weak America and it's weak currency. If we stop importing their junk what use are we to them?
And old Europe... can Bernanke support or rescue the Eurozone?
No... no... no magician could conjure enough money to overcome the problems which are on the EU doorstep.
Independence? What say you?
The Fed ("We control inflation and print money") are the good cop in the good cop/bad cop scheme run by Congress.
Congress threatens to spend/print too much and the Fed is the restraining influence (and does the direct printing).
Congress created the Fed and if enough of Congress agreed they could uncreate them. However, for now, Congress is too interested in spending money they don't have and will do anything to avoid having to end their spending.
We've seen in the huge bailouts a sample of what Congress can be moved to do when it's source of funds is threatened. I'd guess we will see more...
So "killing the Fed" won't help (and anyway isn't likely until the dollar is dead).
Post a Comment