Shadow Government

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.

Auditing the Fed Coming To Pass?

I got a hold of some video of that infamous Barney Frank town hall meeting, where he asked the Larouchie holding the Obama-as-Hitler sign, "On what planet do you spend most of your time." Turns out that a not-nearly-as-crazy questioner asked Frank about HR 1207, the bill to audit the Federal Reserve, which has bailed out the banks for hundreds of billions of dollars under a virtual cover of secrecy. Frank said he supported the audit and promised to pass it by October. He also vowed to curtail the kind of lending power that allowed the Fed to float $80 billion dollars to AIG, and said that the Consumer Financial Protection Agency would curtail the Fed's power by taking the consumer protection elements of their mandate away from them.



There are now at least 282 co-sponsors to audit the Fed, on a bipartisan basis, mostly because people just want these world-historical interventions in the economy to come with some transparency. Frank, who talked about this effort to the Boston Globe the other day, appears sincere in meeting this goal. The economic powers in the Obama Administration really don't want any part of this, saying that "You want to keep politics out of monetary policy," but this isn't really about politics but about giving the public a sense of what they're paying for on a daily basis. The Federal Reserve just lost a lawsuit that will require more disclosure about the emergency deals they have cut. If Barney Frank and Ron Paul are getting together on this, I think the tide is turning.