Here’s the imaginary conversation:
Congress: Hey, Bernake! What are you guys up to with the money supply?
Bernake: Don’t worry about it- we’ve got it covered.
Congress: No, seriously, we want you to account for what you are spending and doing.
Bernake: No, seriously, don’t worry about it! We’ve got it covered. And look, if we had to account for what we are doing, it could very well mean bad things for the economic and financial future of the U.S.
Bernake is about to go up for a confirmation hearing to serve a second 4 year term as the chairman of the Fed.
To quote Reuters: “congressional proposals to audit the Fed and strip it of regulatory powers as part of post-crisis reforms could damage prospects for economic and financial health in the future.”
Stripping it of regulatory powers, maybe. Doing an audit? What could that do to damage its effectiveness other than expose inept-ness?
"These measures are very much out of step with the global consensus on the appropriate role of central banks, and they would seriously impair the prospects for economic and financial stability in the United States," Bernanke wrote on the Washington Post's website.
Yep- a central bank should be part of the regulatory soup for a country, that makes sense. But… you didn’t do your job last time. There was no regulation, Benjamin. And now there is somehow tons of money and it is just being invented out of thin air. The country is still kind of a wreck, we are staring down the hole of what Obama calls a double dip recession and I am reading articles about renewed Wall Street bonuses being a boon to the Swiss watch economy. What gives, man?
The proposal to audit the Fed did win a committee vote recently, even over objections of House Financial Services Committee Chairman Barney Frank.
The Senate version of Frank, Banking Committee Chairman Christopher Dodd, has written his own proposal to turn the Fed into an organization that does nothing more than make decisions about setting benchmark interest rates.
"The Fed played a major part in arresting the [financial] crisis, and we should be seeking to preserve, not degrade, the institution's ability to foster financial stability and to promote economic recovery without inflation," Bernake said. Yeah, you played a big role because there is no one else in the space, Bernake. What this is all about is taking your Fed out of the game and getting someone in there who will do the job you were supposed to be doing. It’s like getting fired- you are not irreplaceable, my friend.
Bernake makes just such an argument, saying that the fact that the Fed knows a lot about complex financial institutions and that is valuable in supervising them. So, basically, he is saying he and his Fed are the only people smart enough to take care of the money.
I’m sure there will be endless Congressional debate over this, and I hesitate to think that much will change. Obama supports Bernake, as he has given the thumbs up to him going for another term- and that means that Bernake will likely sail through his confirmation hearing, stay on the job, and use his connections to keep the Fed right where it is- with a combination of fear tactics and elitism. His American way.