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Posts Tagged ‘is the Federal Reserve independent’

Is Ben Bernanke a Grand and Wonderful Wizard?

Posted by Larry Doyle on July 21st, 2009 10:53 AM |

“There’s no place like home.”

Just as Dorothy in The Wizard of Oz merely wanted to return to the peace and comfort of her home in Kansas, aren’t we all hoping to ‘get home?’

What is home and how do we get there? Home is a sense of economic stability and future prosperity achieved by ‘following the yellow brick road.’ If it were only that easy.

Many believe The Wizard of Oz is not simply a whimsical child’s story. Having been written in the late 1800s, does the story represent a populist message? A progressive message? Is the yellow brick road a symbol of the ‘gold standard?’ I will defer to literary historians who are far more schooled than me on these topics.

What about ‘the grand and wonderful wizard’ Ben Bernanke? Are we merely supposed to disregard that ‘man behind the curtain?’ Well, folks, we’re not in Kansas anymore and if we are ever going to ‘get home’ then we had better start promoting an increased level of transparency and accountability along the way.

I am not here to impugn Mr. Bernanke. I do not question his character or his intentions. In fact, I think he is a far better Fed chair than his predecessor Alan Greenspan. However, is Ben Bernanke and the Federal Reserve all-knowing and all-powerful? I think not. Is the economic future of the United States of America so dependent on one man and one institution to determine an accurate and timely path for monetary easing and tightening? Whether we like it or not, our economic system is totally dependent on the Fed. Read what the ‘wonderful wizard’ thinks about The Fed’s Exit Strategy in today’s WSJ.

The risks involved in our dependence upon the Fed are far too great. What needs to be done?

The Federal Reserve must be audited. What is on the Fed’s books? What are all of the assets and the liabilities? What are the Fed’s short term and long term risks? The need for transparency in our economy has never been greater. The least transparent entity within our economic sphere is the Federal Reserve.

Two hundred and seventy five Congressmen have signed a bill, HR 1207 and S 604, sponsored by Congressman Ron Paul (R-TX) requiring an audit of the Federal Reserve. This bill is currently in the House Financial Services Committee, a very critical stage. I beseech anybody who loves our country to solicit your representatives to support this bill. Instructions for doing so are in the above link.

Do we have the brains, the heart, the courage?


For a fuller understanding of the inner workings of the Federal Reserve, please review:

The All Powerful Federal Reserve
June 12, 2009

The All Powerful Federal Reserve: Part II
June 12, 2009

Don’t Call the Fed Independent
June 17, 2009

Fed Independence and the Constitution
June 24, 2009

Don’t Call The Fed Independent

Posted by Larry Doyle on June 17th, 2009 3:04 PM |

An independent Federal Reserve Bank has been one of the cornerstones of free market capitalism. In my opinion, those days are over. Politicians, central bankers, and financial titans would certainly dispute this statement; the simple fact of the matter is the Fed has not been an independent entity for a long time. That lack of independence is now further exposed. President Obama’s plan to designate the Fed as the uber-regulator for our financial system solidifies it.

The need for an independent central bank has always been viewed as critical to the workings of our markets. The Federal Reserve itself promotes this independence:

Who owns the Federal Reserve?

The Federal Reserve System is not “owned” by anyone and is not a private, profit-making institution. Instead, it is an independent entity within the government, having both public purposes and private aspects.

As the nation’s central bank, the Federal Reserve derives its authority from the U.S. Congress. It is considered an independent central bank because its decisions do not have to be ratified by the President or anyone else in the executive or legislative branch of government, it does not receive funding appropriated by Congress, and the terms of the members of the Board of Governors span multiple presidential and congressional terms. However, the Federal Reserve is subject to oversight by Congress, which periodically reviews its activities and can alter its responsibilities by statute. Also, the Federal Reserve must work within the framework of the overall objectives of economic and financial policy established by the government. Therefore, the Federal Reserve can be more accurately described as “independent within the government.”

The market has traditionally viewed the workings of the Fed as being above the fray. In years past, that independence was critiqued as being almost secretive. The Fed heard those criticisms and has tried to be more transparent while still independent.

In my opinion, the Fed can no longer lay claim to being an independent entity. In fact, the more I see and hear of the Fed recently, it has not been an independent entity for a protracted period. When did the Fed begin to lose its independence? Under Alan Greenspan during the late ’90s, if not before.

While Greenspan was the chair of the Fed, he was enormously well respected. In hindsight, he was not near the star we thought and history will not treat him kindly.

Greenspan politicized the Fed more than we ever knew. He curried favor with the Clinton administration and was heavily involved in keeping the derivatives market unregulated. Until now. (more…)

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