And… The Federal Reserve Wins Again
Courtesy of Tim Iacono at The Mess That Greenspan Made
The American public understands evil big banks (or at least they think they do), but they clearly don’t understand the biggest evil bank of them all – the central bank – and that’s probably why, in this election year, the Federal Reserve got off virtually scot-free in the Senate’s recently passed financial market reform bill.
This Bloomberg story has the details:
Senator John Ensign went into a Capitol Hill meeting with four Federal Reserve bank presidents and emerged to say he was convinced of their “concern for Main Street.”
The presidents “argued very vociferously” that a Senate proposal to limit the Fed’s supervisory authority to banks with assets of $50 billion or more would make it “too New York- centric,” the Nevada Republican said after he and other lawmakers attended the May 5 meeting.
A week later, Ensign joined 89 senators in voting to let the central bank keep its authority over 5,000 banks. The vote was another victory for the Fed, which months ago faced one of the biggest challenges to its power and independence in its 96- year history as lawmakers responded to public anger over bailouts of Wall Street firms.
… The Senate bill contains most of what Fed officials sought. In addition to preserving their bank-supervisory powers, it maintains a ban on congressional audits of interest-rate decisions that some lawmakers had sought to strip away.
What continues to amaze me about the last few years is that the Fed is still largely viewed as the group that saved the world rather than the one that played a key role in causing the mess. In this report, Charles Schumer (D-NY) once again notes that Ben Bernanke rescued us all from another Great Depression and, with most elected leaders’ time horizon for deep thinking stretching only to the next election, that’s probably good enough.
Surely the most important reason that the Fed got away virtually unscathed (along with the GSEs, but that’s more political than anything else) is that most of Congress doesn’t really understand what the Fed is or what it does and, since there’s no large-scale public outcry, why mess with the group that prints the nation’s money?
Pic credit: Jr. Deputy Accountant
