But my daily routine has a fundamental flaw; before I start on the highest priority task on my list, I "run my traps." That is, I read parts of the WSJ and check a set of blogs I follow. I really shouldn't do that if I want to get my own tasks done. Almost without fail, I read something that sets my mind to whirling and my fingers itching to write something in EconoBlast about what I've read, even though I've sworn I will not do so this day.
Well, I've failed again. I simply cannot ignore the self-serving, dissembling remarks of Ben Bernanke as he wrote here on Sunday, Nov. 29, 2009, in the Washington Post, where he writes,
I am concerned, however, that a number of the legislative proposals being circulated would significantly reduce the capacity of the Federal Reserve to perform its core functions. Notably, some leading proposals in the Senate would strip the Fed of all its bank regulatory powers. And a House committee recently voted to repeal a 1978 provision that was intended to protect monetary policy from short-term political influence. These measures are very much out of step with the global consensus on the appropriate role of central banks, and they would seriously impair the prospects for economic and financial stability in the United States. The Fed played a major part in arresting the crisis, and we should be seeking to preserve, not degrade, the institution's ability to foster financial stability and to promote economic recovery without inflation.After I quit sputtering and muttering under my breath (well, actually, not under my breath; more like talking to myself in a loud voice), the most succinct, descriptive thing I can think of to rejoin Mr. Bernanke's statement is "pig manure." I will hold it to that, since there may be children around somewhere.
Yes, I can easily imagine that Mr. Bernanke is concerned that some members of Congress are insisting on doing the job of the Congress to provided oversight of the Fed. What a thought.
Anyone who reads this blog more than a few times already knows what I think of the Fed and its "independence." Of course the Fed wants to be independent. Why would the Fed want to share any of the vast power it abuses daily?
What Mr. Bernanke leaves out of his statement above --- and assumes we the people will not notice --- is that the Fed bears the largest single identifiable responsibility for causing the financial market debacle we're still working through. The Fed has had bank supervisory authority for a long time. Were was the Fed when the seeds of financial disaster were being sown by the banking system and the shadow banking system? It was serving itself, that's where.
I think Mr. Bernanke is a really smart guy. That's why I say he's dissembling. He's way too smart to actually believe the tripe he wrote in the Washington Post. No, Mr. Bernanke made it to the top of the high priesthood inside the temple itself. He's not about to pull aside the curtain of secrecy for the commoners to see what really goes on inside the temple.
Here, Vincent Reinhart throws down a gauntlet to Mr. Bernanke and the Fed, so intent on keeping the Fed's secrecy and power intact. Reinhart writes
As a result of legislative convenience, bureaucratic imperative and historical happenstance, a variety of responsibilities have accreted to the Fed over the years. In addition to conducting monetary policy, the Fed also distributes currency, runs the system through which banks transfer funds, supervises financial holding companies and some banks, and writes rules to protect consumers in financial transactions. Mr. Bernanke argues that preserving this mélange is not only efficient but crucial to protecting the Fed's independence.Pick up the gauntlet, Mr. Bernanke.
There is an easily verifiable test. The arm of the Fed that sets monetary policy, the Federal Open Market Committee (FOMC), has scrupulously kept transcripts of its meetings over the decades. (I should know, as I was the FOMC secretary for a time.) After a lag of five years, this record is released to the public. If the FOMC made materially better decisions because of the Fed's role in supervision, there should be instances of informed discussion of the linkages. Anyone making the case for beneficial spillovers should be asked to produce numerous relevant excerpts from that historical resource. I don't think they will be able to do so.
The Fed serves itself first, which means it serves its member banks. The Fed insists that it must have autonomy and secrecy to do its job. Milton Friedman, a Nobel Laurette and 10 times the economist Mr. Bernanke will ever be, explained why neither autonomy nor secrecy were in the interests of a strong, stable economy.
Do you really believe that an institution with the power granted the Fed could or should be free of political influence? I certainly do not. And if I'm right, then the Fed should be utterly transparent. We the People have a right --- and a responsibility --- to know what's going on in the Federal Open Market Committee (FOMC) and Board of Governors of the Federal Reserve.
Representative Ron Paul has it right; we should kill the Fed. We should dismantle the Fed and replace it with a simple currency board that enforces a simple monetary rule, just as Milton Friedman argued many years ago. Professor Friedman explained why. Neither the Fed nor any of its economist apologists ever explained why not convincingly.
Why do you suppose that Wall Street tycoons ride around in expensive cars, float around in expensive boats, and are seen around in expensive clothes? How is it they can afford mansions situated on some of the most expensive real estate in the world. Where are their clients' expensive furnishings?
No, it isn't because Wall Street financial wizards are so brilliant. In fact, we have very recent evidence to the contrary. You need look no farther than the Fed for the answer.