Courtesy of Mish
Eight Step Program to Improve Fed’s Image
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.
“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.
“People have been asking whether the Fed is capable of getting its job done right,” said Lynn Turner, a former chief accountant at the Securities and Exchange Commission. “Hiring a former lobbyist from Enron will surely make one wonder.”
In addition, the central bank has been become a target to some members of Congress who’ve posted online videos of their interrogations of Fed officials during public hearings.
One YouTube clip, of Florida Democratic Representative Alan Grayson’s grilling of Inspector General Elizabeth Coleman, has garnered almost 500,000 views in about a month.
Twilight Zone Lobbying
The fact that the Fed’s image needed restoring is bad enough, but hiring an Enron lobbyist and expecting it to improve one’s image is straight out of the Twilight Zone.
And what’s with those CBS 60 Minutes escapades with Bernanke? It is sickening to see 60 Minutes presenting Fed propaganda as news. If 60 minutes wants news, here is news:
Is Anyone Minding the Store at the Federal Reserve?
If 60 Minutes wants more news it should report on HR1207.
Ron Paul: Audit the Fed, Then End It! 5/18/09
Support HR1207!
Please contact your legislative representatives today!
Here’s how: Speak Out – Audit the Fed, Then End It!
8 Step Program To Improve The Fed’s Image
Before a drug addict or alcoholic can be helped, the first step is to admit there is a problem. With that in mind, I propose the following 8 step image improvement program.
1) Bernanke needs to admit the Fed and fractional reserve lending are the root causes of our economic crisis.
The Fed under Greenspan and now Bernanke have blown bubble after bubble with each bubble increasing risk. Bernanke needs to admit he does not have a clue where interest rates should be or why.
Certainly any economist who could not spot this housing bubble a mile away is in academic wonderland and unfit to be setting interest rates.
As recently as 18 months ago the Bernanke said this was contained to subprime and would not spill over into the broader markets. Three months ago Bernanke predicted the unemployment rate would be 8.4% for 2009. Is that hopeless or what? Please see Optimistic Unemployment and Housing Forecasts Looking Downright Silly.
It’s important to note that not a single member on the Fed got this bubble correct. The problem is not just Bernanke.
2) Admit FDIC is part or the problem.
The problem with FDIC is easy to describe: it continually puts off small problem until there is a massive systemic collapse. Banks like Bank United or any of the 63 banks that failed since 2008 had some things in common: high leverage, high risk, and bets on real estate that went sour.
To attract deposits, these banks offered above market rates on CDs and other FDIC guaranteed deposits. Were it not for FDIC no one in their right mind would have banked at most of those failed institutions. Yet those banks were able to continually raise cash because of government guarantees.
Had those guarantees not been in place, many of these banks would have blown up sooner or they would not have attracted so much capital in the first place. FDIC penalizes banks that lend responsibly because their CD rates are lower.
FDIC appeared successful for years but those appearances were deceiving. Instead of having small random bank failures spread out over years, FDIC guarantees one big banking mess like we are facing now.
It’s time to abolish FDIC, except perhaps on checking accounts which are payable on demand deposits that should not be lent out at all.
3) Conduct a complete audit of the Fed.
No one knows what is on the Fed’s balance sheet, what it is worth, who loans were made to or why. Is it any wonder the Fed needs to improve its image? Bernanke preached transparency but he is a big liar. There is no transparency and that is why we need an audit.
4) Devise a plan to phase out FDIC.
It might cause a huge problem to phase out FDIC, but it sure can be done over time. Let’s start working on the plan now.
5) Devise a plan to phase out Fractional Reserve Lending
The way to start is to require 100% reserves on checking accounts (demand deposits that are supposed to be available on demand). People think money is in their checking accounts. It simply isn’t there. It should be and it’s fraud that it’s not.
Greenspan allowed sweeps in 1994 and unbeknown to bank customers, their checking deposits are swept out nightly into savings accounts. Savings accounts have no reserve requirements at all. It is time to end this nonsense. However, this proposal would likely have to be phased in.
6) Sell the Fed’s assets.
Selling the Fed’s assets will have to be done over time, but it can easily be accomplished in 3-5 years.
7) Let the free market set interest rates.
This is actually easier than it seems and we can start now. All the Fed has to do is step away and let the market set rates. The Fed has no idea what price orange juice should be, what the price copper should be, or how much a loaf of bread should cost. Nor does the Fed have any clue how to set interest rates. The housing bubble is proof enough.
Some say the Fed just follows the market. If that is the case, why do we need a Fed?
The reality is the Fed does not really follow the market, rather it creates massive feedback loops distorting the market. If you have not yet done so, please read the Fed Uncertainty Principle where I outline the process.
8) Carry out the plan to eliminate the Fed, Fractional Reserve Lending, and the FDIC.
Once that is accomplished the Fed will no longer have an image problem and the citizens of the US will no longer have a problem with the Fed blowing serial bubbles or robbing the middle class with its inflationary policies.
