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Fed Vice Chairman Warns Congress On Meddling In Fed's Affairs

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Kohn warns Congress on meddling in Fed's affairs

Thu Jul 9, 2009 2:46pm EDT

WASHINGTON, July 9 (Reuters) - The U.S. Federal Reserve on Thursday launched a robust defense of its independence and warned that efforts in Congress to put monetary policy under political sway would hurt the economy.

Fed Vice Chairman Donald Kohn said opening up some of the U.S. central bank's most sensitive decisions to political scrutiny could result in higher long-term interest rates and hurt the United States' credit rating. Kohn was speaking before a Congressional panel where he was seeking to beat back a proposal that would open policy decisions by the U.S. central bank to audits by a federal watchdog agency.

"Any substantial erosion of the Federal Reserve's monetary independence likely would lead to higher long-term interest rates as investors begin to fear future inflation," he said in testimony prepared for delivery to a House of Representatives Financial Services subcommittee.

Kohn's testimony comes as Congress debates President Barack Obama's plan for regulatory reform, which envisions the Fed taking on an expanded role monitoring risks across the entire financial system to help ward off future financial crises.

The proposal has increased calls for greater accountability at the central bank, which was already facing heavy scrutiny from lawmakers angered by its role in bailing out Wall Street..........continues

http://www.reuters.com/article/wtUSInvesti...945907120090709

This is getting ridiculous now.

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So we can safely assume that whatever they are scared to reveal - will indicate inflationary pressures.

Any ideas ?

Unless it is all just more BS of course.

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It's true unfortunately. What he's saying is that any robust audit would expose the US for the bankrupt nation that it is - this would have an immediate effect on the county's credit rating and consequently bond yields!

yep ;)

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