This is a few days old but I’m just catching up on news after PorcFest and this goes well with “Fed engaged in “cover-up” of BofA-Merrill deal-lawmaker.”
WASHINGTON, June 24 (Reuters) – The Federal Reserve sought to hide its extensive involvement and concerns about Bank of America Corp’s (BAC.N) acquisition of Merrill Lynch amid the latter’s worsening financial condition, a top Republican congressman said on Wednesday.
“The committee has already learned that Ben Bernanke and the Federal Reserve made inappropriate threats to fire Bank of America management unless they went ahead with the ’shotgun wedding’ that was the Merrill Lynch acquisition,” Rep. Darrell Issa of the House Oversight and Government Reform Committee said in a statement released to Reuters.
“The Federal Reserve also engaged in a cover-up and deliberately hid concerns and pertinent details regarding the merger from other federal regulatory agencies,” the statement said.
The committee has obtained a number of emails and documents from the U.S. central bank about its behind-the-scenes role in the merger, according to sources familiar with documents. (Reporting by Julie Vorman and Kim Dixon, editing by Leslie Gevirtz)
Imagine the sheer number of cockroaches Audit the Fed would uncover. Good luck with that, Ben.
The Federal Reserve intends to hire a veteran lobbyist as it seeks to counter skepticism in Congress about the central bank’s growing power over the U.S. financial system, people familiar with the matter said.
Linda Robertson currently handles government, community and public affairs at Johns Hopkins University in Baltimore, and headed the Washington lobbying office of Enron Corp., the energy trading company that collapsed in 2002 after an accounting scandal. She was also an adviser to all three of the Clinton administration’s Treasury secretaries.
Robertson would help the Fed manage relations with lawmakers seeking greater oversight of a central bank that has used emergency powers to prevent Wall Street’s demise. While she wasn’t tied to Enron’s fraud, her association with the firm may raise questions, analysts said.
“Some members of Congress think there are votes in attacking the Fed” after it “unnecessarily and unwisely entangled monetary policy with fiscal policy,” said former St. Louis Fed President William Poole. “The Fed is going to have a tricky time of unwinding what has been done” and will need to “keep in touch with members of Congress more thoroughly,” said Poole, now senior fellow with the Cato Institute in Washington.
They may not mention Paul but it was his presidential campaign and now his HR1207 which is putting some fire under the Fed’s feet.
Tickerguy updates his graph of Bernanke’s Quantitative Easing progress through the 10yr Treasury Note:
What does this mean? For one, higher mortgage rates. With housing bubble prices already deflating, higher borrowing costs are only going to contribute more downward pressure. (Good luck to anyone insane enough to still hold an ARM.)
NEW YORK, May 26 (Reuters) – U.S. Treasury debt prices weakened further on Tuesday after the Federal Reserve bought $1.55 billion of the $8.52 billion of Treasury Inflation Protected Securities (TIPS) dealers had submitted.
The benchmark 10-year Treasury note’s yield, which moves inversely to its price, rose to 3.46 percent <US10YT=RR>, from 3.45 percent shortly before details of the Fed operation. (Reporting by John Parry; Editing by Leslie Adler)
What?! The FED bought inflation proof treasuries. Price inflation that they primarily create through monetary inflation. Is this normal? I’ve not noticed it before.
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
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