Posted on 09/25/2009 10:45:34 AM PDT by Palin Republic
House lawmakers want to pry open the books of the famously secretive Federal Reserve with legislation that would subject the central bank to a sweeping congressional audit.
The effort is overwhelmingly bipartisan. Hardline conservatives and liberal Democrats have banded together in their criticism of the Fed as a major power broker in the financial system that doesn't answer to Congress.
Friday's debate comes as lawmakers consider a proposal by President Barack Obama that would give the Fed new powers to prevent another economic crisis.
"Nobody in my district thinks that the Fed has done such a wonderful job of running the economy that we should continue to cloak them with secrecy for the purpose of protecting them from second-guessing criticism," said Rep. Brad Sherman, a California Democrat.
The Fed is pushing back, warning that its ability to stabilize prices and monitor interest rates would be compromised if it knew politicians were looking over its shoulder.
The House proposal would "cause the markets and the to public to lose confidence in the independence and the judgments of the Federal Reserve," Scott Alvarez, the board's top lawyer, told the House Financial Services Committee in testimony.
The legislation is championed by Rep. Ron Paul, a Texas Republican whose extreme libertarian bent usually doesn't generate consensus in Congress. But as of Friday, Paul's legislation had attracted 295 co-sponsors with a range of political philosophies, including Hawaii liberal Rep. Neil Abercrombie and Rep. Jeb Hensarling, an outspoken conservative from Texas.
(Excerpt) Read more at google.com ...
In as much as Washington gutted the regulations that prevented Wall Street from playing these games in the past, I agree with you.
Conservatives need to stay on top of their people so this doesn’t get politicized.
++++++++++++++
Maybe we truly are (or will soon after 2010) entering a period of sweeping clean up of corruption. Van Jones, Rangle (??), ACORN, the FED (??), the Socialists (we can only hope) and the corrupt Republican establishment.
We need to refuse to allow corrupt politicians to manipulate uncovering problems at the Fed to appear to be ‘cleaning up the country’ when they have no intention of doing so.
Are there Republican duplicities related to the Fed and the banking problems we’ve faced? Sure. But I’ll put the ‘look at us, we’re cleaning up corruption’ obfuscation and shell game directly and primarily at the doorstep of the Democrat party.
BELIEVE ME . . .
They will bring the country to below it’s knees
before
they will tolerate ANY scrutiny.
Nope. That regulation was useless, dangerous, counterproductive and harmed our prosperity. It prevented the useful combination of financial services products that other international bank enjoyed and as a result our banking sector fell behind others prior to the 1990s.
One thing that Glass-Steagall did, was prevent companies from becoming "too big to fail without destroying the US economy" -- thereby preventing that excuse be used to bail them out with our tax dollars when they faltered.
Ultimately, repealing Glass-Steagall paved the way for the later bailouts -- government bailouts which I am assume that you disagreed with, correct? So what other solutions are/were there for preventing the "we've got to bail them out because they are so big that they'll take our economy with them when they fall" political move?
After these huge losses you can’t seriously believe that Wall Street should be let loose again. Remember that woman who jumped into the cage to play with the polar bears? It’s like if she had lived, and went and jumped in again.
parsy, who says it is past time to wake up to the Wall Street crap
I don’t know that we had any choice but to to do the bailout in some form. I hate that “fact.” I wish GS, JPM, and the whole rotten bunch could have been left to go down the tubes and Wall Street razed to the ground.
But, one has to be an adult and that means facing the hard choices. Wall Street hasn’t been playing with its own money. Its like if you live in a neighborhood with 100 homes. What if 20 of those homeowners are irresponsible and let their houses go into default because they have a gambling problem. You want to let them lose their homes, but you know when those homes hit the market all at once, your home value is going to sink. Any subsequent appraisal will affect your home as a comp. Plus 20 families booted out means 20 sets of kid and wives homeless.
What’s the way out. There’s not a good one. Best thing is to try to reduce subsequent damage and try to put into place sensible regs to reduce chance of it happening again or reduce the scope of possible damage.
parsy, who says we live in an imperfect world
Yes, agreed, because the repeal of Glass-Steagle meant that financial corporations could become so large & diversified that they could take the entire economy down with them if they fell.
My point is that what do we do to prevent that from happening again? Because no one wants a repeat performance of these bailouts. Is the answer reinstating Glass-Steagle or something like it?
The financial industry is certainly going to have their say on whatever legislation is enacted. How are we going to know if the new legislation is a just a new scam or a real solution?
I have a lot more questions than answers, in part because I am not a financial expert -- but am very curious.
While I have issues with the Fed, it seems to me that they’ve been between a rock and a hard place, trying to design monetary policy to support the lunatic spending and crazy legislation emanating from elected representatives. CRA, then the POS act that permitted creation of financial weapons of mass destruction by loosening derivative regulation. Derivatives wouldn’t have gone wild if banks weren’t forced to lend to higher risk individuals who had little to no skin in the game. Lenders needed a means to offload the hot potato, IMO. Then implementation of mark to market and permitting wild short selling in May/June 2007 were the Jinga blocks which were removed from the financial tower, leading to its collapse.
Tell me where I’m wrong, folks. Happy to learn.
“Are you talking about CIA, the Supreme Court? No? The Fed?
You mean that group that testifies to Congress every 6 months, has a yearly audit and has the meeting minutes published 6 weeks after each meeting?
It’s no more ‘secretive’ than your average school board IMHO.”
Congress often pries into the happenings at the CIA and thats a good thing and it has the power to impeach any judge at the supreme court. Judges at the supreme court give lengthy reasons for their decisions. If they didn’t, they could eventually be impeached.
“I would prefer a non-political organization determining the money supply. God standard, a bunch of bankers, a computer program - any of those choices is preferable to politicians misusing the supply of money.”
Why would it be better for an organization to be non-political and thus only care about what they can gain directly for themselves and how they can manipulate things directly for themselves than how they can manipulate things to possibly get elected? How is it better for us not to know what they are doing and why so we have no possible way of knowing whether or not they are doing the right thing for the right reasons?
“Then you misunderstand free market capitalism. It requires laws that protect the rights of property and tort law to enable trust in commerce. So, yes, it does need a limited amount of ‘help’.”
Those laws are general laws about fairness. They are for fairness and justice in a society. They are not created for a market to work they are created for fairness and justice . Markets do not require them in order to function. The federal reserve has nothing to do with fairness or justice. Totally different. It might be fair, but than again it might not. You don’t want us to know. But it does necessarily meddle with the markets with every word it utters.
“Money and banking is also a matter of trust. Ideally, money should be a stable and consistent measure of value. A central bank is not required for this to happen, but it can be an enabler.”
Or it can make the problem worse.
“The Federal reserve policy should be stable value of money. Nothing more.
‘Meddling’ to support that goal is ok, meddling to try to micro-manage economic cycles or bail out institutions - not ok.”
We can have no idea what the actual federal reserve policy is because you don’t want us to know. Whether or not they are doing it for private gain in some manner (helping out their buddies) is something you want to pretend is impossible because they are technically not part of the government and to you only elected officials can be bad, which is an absolutely ridiculous idea.
You're under the mistaken impression that Bernanke and his buddies at the Fed get to keep the Fed's earnings every year.
How is it better for us not to know what they are doing
What aren't they telling you? When they change interest rates, they tell you. And then, they release the minutes of the meetings where they made those decisions. When they buy or sell bonds, they tell you. When they testify before Congress, you can see idiots asking Bernanke questions for hours. And sometimes, the questioners even know what they're asking, but not often.
and why so we have no possible way of knowing whether or not they are doing the right thing for the right reasons?
They tell you what they're doing and why. It's often years later before we know if it was the right thing.
“You’re under the mistaken impression that Bernanke and his buddies at the Fed get to keep the Fed’s earnings every year.”
Nope.
“What aren’t they telling you? When they change interest rates, they tell you. And then, they release the minutes of the meetings where they made those decisions. When they buy or sell bonds, they tell you. When they testify before Congress, you can see idiots asking Bernanke questions for hours. And sometimes, the questioners even know what they’re asking, but not often.”
How many times do I have to list what cannot be checked? What exactly would they or you be opposed to an audit looking into if they could look into nothing more than they already do?
They don’t have to reveal their monetary policy or open market operations. They don’t have to reveal information about deals with international organizations or foreign governments.
“They tell you what they’re doing and why. It’s often years later before we know if it was the right thing.”
No, they do not. They do not have to, as things are currently. They cite privilege whenever they are asked something they don’t want to respond to.
Why don’t you not oppose an expanded audit since you are under the mistaken belief that it will lead to no more information? What could possibly happen if nothing more is looked into as you seem to claim?
““Then you misunderstand free market capitalism. It requires laws that protect the rights of property and tort law to enable trust in commerce. So, yes, it does need a limited amount of ‘help’.”
Those laws are general laws about fairness. They are for fairness and justice in a society. They are not created for a market to work they are created for fairness and justice . Markets do not require them in order to function. “
I beg to differ. Free market capitalism as has been practiced in western (and now global) civilization has been built on concepts like corporations, limited liability, contract law (and related torts), and most fundamentally, PROPERTY RIGHTS. Unlike your personal rights, property rights require a legal framework.
Capitalism will not lead to prosperity in a state of anarchy, but needs “Ordered Liberty” in a culture based on trust to thrive.
Hence, we DO need a legal system to advance and support capitalist free enterprise. It has nothing to do with ‘fairness’ and everything to do with enabling a system of lawful commerce.
Me: “Money and banking is also a matter of trust. Ideally, money should be a stable and consistent measure of value. A central bank is not required for this to happen, but it can be an enabler.”
you: “Or it can make the problem worse.”
Certainly. The Fed is a means to an end (money supply) and other means are possible.
Me: “The Federal reserve policy should be stable value of money. Nothing more.
‘Meddling’ to support that goal is ok, meddling to try to micro-manage economic cycles or bail out institutions - not ok.”
You: “We can have no idea what the actual federal reserve policy is because you don’t want us to know.”
Absurd strawman on multiple levels. First you DO know the actual federal reserve policy, if you only care to (a) READ THE CONGRESSIONAL LAWS ON IT, like Humphrey-Hawkins and (b) READ/WATCH Fed minutes, year-end audits, and reports to Congress. The Fed *policies* are well-known and understood by observers.
Your ignorance of stated Fed policies is your problem not mine.
The one specific area of Fed opaqueness that Congress wanted clear up was the specific financial transactions in their various banking salvage and purchase operations. I am all for more openness there.
“Whether or not they are doing it for private gain in some manner (helping out their buddies) is something you want to pretend is impossible”
Another strawman, I never said that...
” because they are technically not part of the government and to you only elected officials can be bad”
*another* strawman, jeeze ...
“, which is an absolutely ridiculous idea.”
Your attempt to read minds and put words in my mouth is the only ridiculous idea.
Nope.
Then why do you think the Fed "only care about what they can gain directly for themselves"
They don’t have to reveal their monetary policy or open market operations.
What do you want to know about monetary policy or open market operations that isn't available?
They don’t have to reveal information about deals with international organizations or foreign governments.
Ditto.
These problems were created by GOVERNMENT mismanagement.
Fed mismanaged money supply - Congress incited Fannie and Freddie. SOX rules channelled money into real estate. Government poured money into subprime areas and via community reinvestment act was inducing more lending ... then in 2008 the Dems allowed oil to go to $140/barrel, a bubble to prick the economy, and stalled on drilling, etc....
Every way you look at it, GOVERNMENT drove the economy into the ditch.
After these huge losses you can’t seriously believe that Big Government should be let loose again. Remember that woman who jumped into the cage to play with the polar bears? It’s like if she had lived, and went and jumped in again.
wosg, who says it is past time to wake up to the Big Government crap
Keep up the good work, but without a real Revolution, this is never going to happen.
I agree gov’t had a lot to do with it, but the real culprit is still Wall Street. They are big boys and didn’t have to screw investors with garbage. But they made a lot of money doing it.
parsy, who still lays the bulk of the blame to Wall Street
“I beg to differ. Free market capitalism as has been practiced in western (and now global) civilization has been built on concepts like corporations, limited liability, contract law (and related torts), and most fundamentally, PROPERTY RIGHTS. Unlike your personal rights, property rights require a legal framework.”
Markets don’t need ordered liberty in order to survive. Markets are the default nature of man. We trade things if it suits us. We might also take things, but markets do not cease to exist when people can take things, because some people will still choose to trade rather than to take things.
We need a legal system to prevent violence and injustice. The market itself does not require a legal system.
“Certainly. The Fed is a means to an end (money supply) and other means are possible.”
Yes, it is not necessary.
“Absurd strawman on multiple levels. First you DO know the actual federal reserve policy, if you only care to (a) READ THE CONGRESSIONAL LAWS ON IT, like Humphrey-Hawkins and (b) READ/WATCH Fed minutes, year-end audits, and reports to Congress. The Fed *policies* are well-known and understood by observers.”
The have a mandate from congress to keep money stable, they don’t have to tell us or anyone else what their policies are that supposedly lead to that. Why do they bail out some companies but not others? That is what I’m talking about. The CONGRESSIONAL LAWS ON IT do not state how they do it. Well, that is what I want to know. How they figure out who to bail out and who not to bail out.
“Another strawman, I never said that...”
Whenever you argue that the type of “independence” that means no looking into things is a good thing you are arguing that secretive experts are preferable to accountable representatives.
No one with power in the government should be independent as they are.
“Then why do you think the Fed only care about what they can gain directly for themselves”
Because I think they can mess with the market to lead to results that benefit them.
“What do you want to know about monetary policy or open market operations that isn’t available?”
Nothing about monetary policy or market operations is available. I want the people who audit them to be able to look at that.
“Ditto.”
I meant that that is how things are now. Why do you want them to not have to reveal what they do and why they do it?
Thats absolutely crazy. Give a bunch of unaccountable people a bunch of ridiculous power and then say we can’t look into it? Absolutely farking crazy.
“One thing that Glass-Steagall did, was prevent companies from becoming “too big to fail without destroying the US economy””
Not true. The concept is a myth. see below.
“— thereby preventing that excuse be used to bail them out with our tax dollars when they faltered.
Ultimately, repealing Glass-Steagall paved the way for the later bailouts”
No, it did not. Every single bailed out company existed prior to 1998. Most of the banks that failed, and the key investment banks like Goldman sachs, that were bailed out, were banks UNAFFECTED BY THE CHANGE IN REGULATION. The only banks you can point to where this applies is Citibank and Bank of America, but even there, both banks were actually not the worst hit (compared with eg Wachovia or IndieMac etc).
Things would have been undoubtable worse without glass-steagal, because companies like Chase and Wachovia would have had no rescuer in Bank of America. We would have therefore seen more failures, just like in pre-glass—steagal 1988-1991 era, where almost 2,000 S&L failed in 3 year period. far fewer banks failed in 2008.
“Too big to fail” has nothing to do with Glass-Steagal and everything to do with how the Govt and Congress ‘marketed’ the bailouts.
AFAIK, Lehman Bros wasnt “too big to fail” but letting it fail almost seized up the global financial system, since stopping them from going belly up would have saved the whole chain reaction of global panic in oct 2008.
“So what other solutions are/were there for preventing the “we’ve got to bail them out because they are so big that they’ll take our economy with them when they fall” political move? “
The best way to stop the gun-to-the-head ploy is not to fall for it. Those claims are false and fail to account for the inevitable unwinding of any economic structures that are non-economically viable.
In other words, saying a company is ‘too big to fail’ is like saying a fish is ‘too big to die’. It’s nonsense. The collateral damage of a company going Ch 11 might be serious, but a rather smallish Lehman was the most serious Chapter 11 of the era, and the collateral damage has more to do with how it unwinds than the size itself.
No company is ‘to big to fail’ and in fact we *saw that this year* when we wasted $20 billion stopping GM from the ‘unthinkable’ action of going BK to finding out 6 months later - oops, they are going BK anyway.
Citibank went through a semi-chapter-11 via govt getting options that dilute the stockholders significantly. In fact, Citibank’s bailout was, like GM, a slow-motion from of Ch11. The bond and stockholders got a big haircut in the process. If Citibank isnt too big to fail, nobody is.
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