Congress Gets “Dumb And Dumber” On The Federal Reserve
While Asian economies appear to be leading a recovery, politicians in the US are making dumb move after dumb move, with the recent decline in the dollar tied directly to the US House’s passage of the $1.2 trillion health care bill. To steal a line from the Jim Carrey movie Dumb and Dumber, “just when I think you can’t get any dumber, you go and do a thing like this.”
A member of the Senate is proposing a bill that would appear to politicize how the Federal Reserve works and would also create another bureaucracy largely controlled by Congress. Bloomberg News is reporting:
Nov. 11 (Bloomberg) — The Federal Reserve faces the biggest blows to its authority and independence in five decades under legislation championed by its lead overseer in the U.S. Senate.
The financial-regulation overhaul proposed yesterday by Senator Christopher Dodd would strip the Fed of its role as a bank supervisor and give Congress a greater voice in naming the officials who set interest rates. The measure opens the door to interference from politicians who might disagree with any move by the Fed to raise rates from record lows, former central bank officials said.
“If you were worried that the Fed will be pressured to remove its accommodation while the unemployment rate is still very high, you’ve got to look for leverage,” Vincent Reinhart, a former director of the Fed’s Monetary Affairs Division, said in an interview. Dodd is aiming for “some political reach into all the voters” on the Fed’s Open Market Committee, which decides the benchmark U.S. interest rate, added Reinhart, now a resident scholar at the American Enterprise Institute.
U.S. stocks, bonds and the dollar would collapse if investors perceive Congress violating the independence of the policy-setting panel, former Fed Governor Laurence Meyer, now vice chairman of Macroeconomic Advisers LLC, said last month.
Dodd’s measure would also curb the Fed’s ability to make emergency loans to individual companies. …
Under the 1,136-page proposal, the Fed would lose its bank-supervision role to a new Financial Institutions Regulatory Administration. Its consumer oversight duties would go to a new Consumer Financial Protection Agency. An Agency for Financial Stability would have broad powers to protect the economy from financial risks, with the Fed chairman holding one of nine seats. Dodd would leave the Fed with monetary policy as it main responsibility. The White House and Congress would gain sway over the private-sector directors who choose regional Fed presidents, who vote on interest rates. Under the proposal, commercial banks would lose their power to appoint directors of the 12 regional Fed banks. Instead, directors would be chosen by the Fed’s Senate-confirmed governors, and each board chairman would be subject to Senate approval. Currently, two-thirds of directors are chosen by private-sector banks and one-third by the Washington-based governors. The bill must be approved by the Senate, reconciled with the House version and signed by President Barack Obama to become law. It goes beyond proposals from the Obama administration and House Financial Services Committee Chairman Barney Frank, who would expand the Fed’s bank-supervision role.
We’ve already deeply politicized our legal system, with judges now making policies through their rulings and voters overturning many of them via ballot initiatives and if Senator Dodd has his way, we may see the same thing happen at the Fed.
Tags: Asshats, Domestic Issues, Politics
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