Wednesday, July 22, 2009

The FED open to scrutiny, now that would be interesting.

Bernanke Seeks to Cordon Off Monetary Policy From Lawmakers

July 22 (Bloomberg) -- Federal Reserve Chairman Ben S. Bernanke sought to cordon off the central bank’s independence on monetary policy from congressional scrutiny as lawmakers challenged its authority on everything from currency swaps to emergency loans.

Posted by flintster1994 @ 08:06 AM (776 views)
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3 thoughts on “The FED open to scrutiny, now that would be interesting.

  • “At stake is the future structure of the 95-year-old central bank, which was conceived to stem financial panics and is charged with achieving stable prices”

    If that is the case, why did it lower interest rates while inflation was rising? Greenspan did whatever it took to keep his job. He was in effect a government flunky. Anyone who has worked in America for a decent length of time will know that the culture of corporate brown-nosing is so ingrained that it would render the idea of a truly independent Fed rather unlikely. The only way round it would be for the public to vote in a Fed chief. At the moment they are hired by the government and can be fired by the government. Bernanke is currently fighting to retain his job, so I doubt we’ll see anything sensible from him

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  • charlie brooker says:

    A directly elected Fed Chairman sounds like a better arrangement than that prevailing one, but its far too sensible for the vested interests to accept.

    They’d use scaremongering to placate it, just like they use scaremongering to fight wars for oil and to take our liberties away.

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  • Congressional oversight of the Fed means that Congress gets to see a re-run of the action when the game’s finished.

    The Fed is also charged with achieving maximum employment. To do that it would need to distribute public credit openly and impartially and see to it that credit found its way to businesses and consumers instead of secret bailouts to banking cronies who made bad loans.

    What’s the point of making rules about congressional scrutiny anyway since the Treasury/Fed will find ways around them and use the Bush line – “it’s an emergency, we’ve got to take action over the weekend, you can debate the causes and consequences when it’s too late to stop the action we’re taking”. Look at the AIG bailout. The Fed is supposed to take bonds from the government and swap them for Fed Reserve notes in order to provide the government with the funds it cannot raise from taxes. After all the Fed is the lender of last resort, set up to fund banks and the federal govt. But when the Fed bailed out AIG the government/Treasury for the first time auctioned government bonds in order to fund the Fed – to help it to deal with its unprecedented borrowing needs (i.e. to swap the bonds directly for toxic debt).

    Another first came last October when the Fed started to pay interest on the reserves that banks are required to have at the Fed – essentially taxpayers paying interest on the reserves banks are required to have and which are a tool for their own private profit (after all those reserves are multiplied into new money as interest-bearing loans). Those interest-bearing reserves amount to about $700 billion (about a tenth of the $7 trillion of the “loans and leases in bank credit” in the system). The Fed’s website says the Fed banks are ‘not for profit’ – a lie, but that’s another story.

    PS If you research Paul Volcker (Fed Chairman in the 80s) you’ll find he’s an influential member of the exclusive Pilgrims Society, a WASP gentlemen’s club of British aristocrats and Anglo-American banking families. Pilgrim members have headed most of the big banks and insurance companies you could name and are very big in many media orgaisations.

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