http://www.forbes.com/

Extraordinary times require extraordinary actions. Nowhere is that more apparent than in the bold policy moves undertaken by the Federal Reserve over the past two years. The financial crisis forced the Fed to be aggressive and creative in its attempts to provide liquidity to credit markets that had frozen up. These were necessary steps, and mostly applauded.

But the very boldness of its actions has put the independence of the Fed at risk. Congress is now clamoring to audit the Fed, and some of the policy proposals currently under discussion at the Federal Reserve will only increase the threat to its independence.

Without independence, the political cycle would subject the central bank to political pressures that, in turn, would impart an inflationary bias to monetary policy.

On this view, politicians in a democratic society are short-sighted because they are driven by the need to win their next election. This is borne out by empirical evidence. A politically insulated central bank is more likely to be concerned with long-run objectives.A variant of the argument for central bank independence is that control of monetary policy is far too important to put in the hands of politicians. As a group, they have repeatedly demonstrated the lack of political will power to make difficult economic decisions. But now they want to assert control over the Fed. The bill, HR 1207, introduced by Sen. Bernie Sanders (who brought you the “Employ Americans First Act”) and Rep. Ron Paul, would assert greater control over the Fed. As Ron Paul writes on his Web site: “Auditing the Fed is only the first step towards exposing this antiquated insider-run creature to the powerful forces of free-market competition. Once there are viable alternatives to the monopolistic fiat dollar, the Federal Reserve will have to become honest and transparent if it wants to remain in business.”

Great! Obviously, monetary policy is so falling-off-a-log simple that your elected representatives can insert themselves via the demand for transparency into decisions of true complexity and subtlety. Why am I not feeling reassured?

I believe cy_cy says it all:

Quoth Cooley- “Without independence, the political cycle would subject the central bank to political pressures that, in turn, would impart an inflationary bias to monetary policy.”

Is this sentence for real? Perhaps you could summon a grad student to investigate the “inflationary bias” pre-Fed and post-Fed. (I realize you’re too busy.)

Since the Fed’s inception, the dollar has lost over 98% of its value. Before the Fed, the dollar would actually GAIN value as time passed (thanks to productivity gains.) Are you implying that the so-called “independent fed” should be patting itself on the back for (so far) preventing hyper inflation?

You clearly imply that Ron Paul wishes to bring transparency to monetary policy so that he himself can make macro monetary calls (manipulating interest rates, reserve rates, etc.) You imply that he is not qualified to be making these decisions. I am sure he would agree: his entire point is that no individual or small group can centrally determine interest rates.

The fact that you would so horribly misstate Paul’s monetary thesis suggests you either have not bothered to research his thesis (yet have the audacity to write an article about it anyway), or you do know what he is trying to say, but you grossly misconstrued his message so that you could shout it down. Either option is an overwhelming suggestion of both intellectual bankruptcy and, in light of your career choices as a writer and an educator, severe moral bankruptcy as well.

Tags: The Fed, HR 1207, Intellectual Cowardice

http://www.cnn.com/

Scuffles were reported outside the Bank of England Wednesday, as thousands of protesters, including anti-capitalists, anarchists, and environmental campaigners, gathered in the heart of London’s financial district a day before the G-20 summit. Eleven people were arrested for being in possession of police uniforms, a police spokesman said. They had earlier been stopped while riding in an armored personnel carrier near Bishopsgate, near the Bank of England, and the vehicle will now be examined by police, the spokesman said. Protesters occasionally lunged forward against the police line, and one masked protester hit out at polices with a long black pole. One police officer was whisked to the side after apparently being hit. Police held their line and occasionally pushed protesters back with their hands. Organizers of the protest insisted their intentions are “theatrical,” promising “mirth, merriment and the love in our hearts” and urging participants to “bring food to share, water, tea making facilities, something to sit on, a pop up tent if you plan to stay late.” But activists also published a map Tuesday with the details of scores of banks, financial companies, law firms and trading exchanges with offices in the City, prompting fears that symbols of capitalism could be targeted. “It is believed that the majority of the protesters intend to conduct a peaceful demonstration,” the police said in a statement. “Businesses should however, remain vigilant at all times and ensure that buildings are secure. Banks and financial premises are the targets of the protest although this could extend to all premises in the city.”

I’m not seeing any stories yet but I see on the office TV on CNN that there are individuals throwing items through windows of banks or local businesses. Looks like we have vandarchists, not anarchists. At least not American, libertarian anarchists but European, leftist, anti-establishment ‘anarchists.’ Which I prefer to describe, as above, vandarchists. They give us real free market anarchists a bad name. I’d also like to correct the article. The banks, financial companies, law firms and trading exchanges which are in London are not symbols of capitalism. They are symbols of fascism, corporatism, neo-merchantillism, or at minimum state-capitalism which really dissolves into those former names. It is just as wrong to call the UK or the USA capitalist as it is wrong to call the old Soviet Russia, Cuba, or China ‘communist.’

Update:

Looks like there were a few free marketeers out and about.

http://finance.yahoo.com/…

Citigroup’s chief economist is being tapped for a job at the short-staffed Treasury Department, which is at the center of the Obama administration’s efforts to battle the financial crisis.

Lewis Alexander will become a counselor to Treasury Secretary Timothy Geithner, according to a government official who spoke on condition of anonymity because a formal announcement has not been made. Alexander will work on domestic finance matters, the official said.

Alexander had worked at the Federal Reserve and also served as the Commerce Department’s chief economist in the 1990s.

Geithner so far has battled the crisis with no key deputies in place. That’s made for a rocky start for the man President Barack Obama put on the front lines of the financial crisis.

Treasury’s handling of a $700 billion financial bailout fund has drawn fierce criticism from Congress and the American public. The government has put up hundreds of billions of taxpayers’ dollars to rescue troubled financial companies, including American International Group, Bank of America and Lewis Alexander’s own Citigroup Inc.

In late February, the government said it will exchange up to $25 billion in emergency bailout money it provided Citigroup for as much as a 36 percent ownership stake in the struggling bank, a move that could put taxpayers at greater risk. The deal represented the third rescue attempt for Citigroup in the past five months. It’s contingent on private investors agreeing to a similar swap.

As a Wall Street insider from a bank that has been one of the largest recipients of government rescue funds, Alexander’s appointment could raise some eyebrows. In December 2007, he was quoted as saying that while he believed the housing market would remain weak well into 2008, it was more likely that the economy would keep growing than head into recession, adding that the housing bubble was “correcting on its own.”

The same Citigroup which is now partially nationalized? The one that made lots of bad business decisions on his watch? He’s now going to work for an institution with even more economic power?

And yet people are pissed over some AIG bonuses?

http://www.bloomberg.com/…

Microsoft Corp., which has $20 billion of cash in the bank, is among the first in the Puget Sound area to benefit from the investment in roads and bridges through President Barack Obama’s stimulus plan.

Local planners allotted $11 million of $214 million awarded to the region to help pay for a highway overpass in Redmond, Washington, connecting one part of Microsoft’s wooded campus with another. The world’s largest software maker will contribute almost half of the $36.5 million cost. Other federal and local money will pay the rest.

Work is scheduled to begin by June, while larger projects in the area await funding, including replacing an elevated highway in Seattle damaged by a 2001 earthquake and a bridge over Lake Washington at risk of cracking in a windstorm. Spending watchdogs and even some Microsoft employees see more pressing needs.

“I’m sure Steve Ballmer or Bill Gates could finance this out of pocket change,” Steve Ellis, vice president of Taxpayers for Common Sense, said of Microsoft’s chief executive officer and chairman. “Subsidizing an overpass to one of the richest companies in the country certainly isn’t going to be the best use of our precious dollars.

“It’s a bridge to Microsoft,” he said. Ellis’s Washington, D.C.-based group, which tracks government spending, coined the phrase “bridge to nowhere” to describe a proposed span in Alaska that got $223 million in federal funding in 2005 and later was canceled.

The city of Redmond says the overpass will relieve congestion on other streets and support a big employer in the region, though one cutting jobs lately. Microsoft said in January that it’s eliminating as many as 5,000 jobs, including some from its Seattle-area workforce of 41,480.

“This project is a mobility improvement for the area as a whole,” said Lou Gellos, a spokesman for Microsoft. An existing bridge a few blocks away is congested and a nightmare for pedestrians and bicycle riders, he said.

The 480-foot (150-meter) span will run over a state highway from an older part of Microsoft’s campus to its newer west campus, where workers are constructing multistory buildings. Plans call for one car lane in each direction, a bike lane and a pedestrian walkway.

“Would it help me personally? Maybe, if I have to go that way,” said Jeff Fletcher, a Microsoft contractor waiting for a bus. “But I think there are better places to spend our money.”

If Microsoft and other private companies had to build all the connecting roads in the first place this wouldn’t be such a problem. If the cost to build the roads were too high other means would be created to transport people or telecommuting would become better developed.

http://www.bloomberg.com/…

The Federal Deposit Insurance Corp. will charge U.S. banks a one-time assessment and increase other fees to replenish its insurance fund, adding $27 billion in costs to an industry already hobbled by the financial crisis.

The FDIC board today approved charging banks an “emergency special assessment” in response to an estimate that bank failures could cost the fund $65 billion through 2013. The added fees are projected to generate $27 billion this year, compared with the $3 billion raised in 2008, the FDIC said.

“We’re taking steps today to ensure that the deposit insurance system remains sound,” FDIC Chairman Sheila Bair said today during the board meeting at the agency’s Washington headquarters. “These steps are necessary because banks, and not taxpayers, are expected to fund the system.”

The deposit insurance fund fell to $18.9 billion in the fourth quarter from $34.6 billion in the preceding three-month period, the FDIC said yesterday. The fund, used to reimburse customers for deposits of as much as $250,000 when a bank fails, has been shrunk by 39 failures since the beginning of 2008.

The FDIC is required by law to replenish the fund when the reserve ratio, or fund balance divided by insured deposits, falls below 1.15 percent. It stood at 0.40 percent at the end of the fourth quarter, the lowest level since the second quarter of 1993, the agency said yesterday.

The one-time emergency fee of 20 cents per $100 in insured deposits would be collected in the third quarter and would generate $15 billion, according to FDIC staff members. A bank with $1 billion in deposits would pay $2 million under the special assessment, they said.

Like the banks need this right now… but it was entirely predictable.

Turns out:

Donna Hanks initially purchased her home (315 South Ellwood, Baltimore, MD 21224) on 7/06/2001 for $87,000. She re-fi’d in 2005 for $270,000, went into bankruptcy in 2006, and this was the 2nd foreclosure. The $300 a month was actually the $340 a month she agreed to re-pay as she was over $10,000 behind in her payments. The house was sold in July 08 and they couldn’t get her out until September 08 after not paying anything for over a year.

Homesteading involves abandoned or never utilized property. This house is obviously owned by at least the bank and a two minute phone call could have revealed it was now sold to a new owner. That house was never hers. It was the banks. It’s unlikely she was even close to having more than 50% of the principle paid.

Groups like ACORN and those who support them helped create this housing bubble by using government to ban so called discrimination in lending, redlining, pushing for the CRA and low interest rates.

That term predatory lending bugs me big time. Why isn’t it predatory borrowing? The government was incentivizing if not forcing banks to lend. No one forced the lendees to borrow. No one forced them to ignore the contract or keep them from having a lawyer look over the mortgage.

If you can’t afford to own, rent. If you want to homestead there is plenty of unutilized land out west.