RSS FeedThe Wisdom Of Giving Authority To Federal Reserve Questioned– What is the Fed and is their Interest The Same As America’s?
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Secretary of the Treasury, Henry Paulson, unveiled his proposal for regulatory change today. His plan involves giving sweeping new powers to the Federal Reserve, which worries many people inside and outside the media. Paulson says his plan will reduce duplication in government.
The problem with the plan involves the Federal Reserve’s role. The Fed is a non-government bank for which the government has no control, other than picking the Chairman and the Board of Governors. After that selection, the Fed can do what it wants. Even the Federal Reserve considers itself independent because it’s “decisions do not have to beratified by the President or anyone else in the executive or legislative branch of government, it does not receive funding appropriated by Congress.” (Quote from the Federal Reserve website)
The Federal Reserve Chairman, Ben Bernanke, told a crowd celebrating Milton Freidman’s 90th birthday, “Let me end my talk by abusing slightly my status as an official representative of the Federal Reserve. I would like to say to Milton and Anna: Regarding the Great Depression. You're right, we did it. We're very sorry. But thanks to you, we won't do it again.”
Those who objected to the Federal Reserve back in 1913 warned us that the bankers would be able to manipulate the economy to buy assets. The Federal Reserve is called the “lender of last resort” because they print the money and determine how much money to print.
The Fed recently gave a member bank, JPMorgan Chase, a $30 billion line of credit to help them buy Bear Stearns. Loans of this sort have not been made since the Great Depression.
Although it is difficult pass such sweeping legislation in their last year in office, Paulson says he wants to get the ball rolling. He recommends that the Federal Reserve share authority with the SEC and other agencies in the government.
Paulson wants to give the Federal Reserve power to “monitor” corporate disclosures. This information could be used to help banks determine the best assets to buy-up and which ones to avoid. We believe there could be a conflict of interest, but Paulson disagrees. “To do its job as the market stability regulator, the Fed would have to be able to evaluate the capital, liquidity and margin practices across the financial system and their potential impact on overall financial stability,'' Paulson said.
The new regulations might go beyond just monitoring the corporate disclosures. Paulson wants to give the Federal Reserve and the private member banks like JPMorgan Chase the authority to write the rules and regulations. He says this could help prevent a financial crisis. But, as other’s have suggested, the legislation could give the fox the right to guard the chicken coop.
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By Dan Wilson - Best Syndication News Writer
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