If you want to know why weakening the Federal Reserve is gaining traction in Congress, take a look at this unbelievable report from Bloomberg:
The Federal Reserve Board has rejected a request by U.S. Treasury Secretary Timothy Geithner for a public review of the central bank’s structure and governance, three people familiar with the matter said.
The Obama administration proposed on June 17 a financial- regulatory overhaul including a “comprehensive review” of the Fed’s “ability to accomplish its existing and proposed functions” and the role of its regional banks. The Fed was to lead the study and enlist the Treasury and “a wide range of external experts.”
Some top central bank officials, after agreeing to the review, saw a potential threat to Fed independence after the Treasury released the proposal, two of the people said. The Obama plan said the Treasury would consider recommendations from the review and “propose any changes to the Fed’s governance and structure.”
Keep in mind that the Fed already has refused to disclose its assets, its balance sheet or its dealings with other banks and investment firms. Now the Treasury Department - the federal agency most directly in charge of the banking sector - asks for a review of the structure of the Fed, just simply how it organizes itself. And the Fed, whose chairman is chosen by the White House, said no.
Simply put, this is a runaway organization. We cannot expect it to be a credible partner on setting bank pay limits, for example, when it is intimately tied to the largest US banks, the CEOs of whom make several orders of magnitude more money than their global counterparts. Obviously those compensation limits will come up short, because a shadowy temple of an organization holds this tremendous, unaccountable power over the financial system.
Paul Krugman may think the Fed is now getting it - perhaps out of fealty to Ben Bernanke - but from where I sit, this is an unelected nation state with the arrogance of a dictator. They need to be brought to heel.