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Fed Under Fire As Public Anger Mounts
WASHINGTON - Suddenly the Federal Reserve is everybody's punching bag.
The Chairman of the U.S. Federal Reserve Ben Bernanke, right, with U.S. Treasury secretary Timothy Geithner, in the background, during a break at the G20 Finance Ministers meeting, in St. Andrews, Scotland Saturday, Nov. 7, 2009. Strip the Fed of its bank regulation powers, some in Congress are demanding. Get probing audits of its behind-the-scenes operations, others say.
The chairman of the Federal Reserve Board is always fair game for criticism and second-guessing, usually over interest rate actions. But this year the criticism is much broader as Congress responds to widespread public anger that the Fed bailed out Wall Street but not ordinary Americans, and with unemployment in double digits.
Former Fed Chairman William McChesney Martin Jr. famously said that the central bank's job was to yank away the punchbowl just when everybody is starting to party. And while Fed Chairman Ben Bernanke has signaled the Fed will keep interest rates low for now, a round of higher rates inevitably will come.
The Fed finds itself both the punchbowl keeper and the punching bag. Imagine the outcry when it does begin to crank up rates - perhaps just ahead of next year's midterm elections.
Fireworks seem likely at Senate confirmation hearings early next month on President Barack Obama's nomination of Bernanke to a second four-year term as chairman.
Many economists and Fed watchers say congressional efforts to rein in the Fed's powers could interfere with the central bank's ability to help guide the fragile economy to recovery.
The Fed's very independence and its unique ability among U.S. institutions to create money out of thin air enabled it to act quickly to stabilize the nation's financial system after it froze up last September after the bankruptcy of the Lehman Brothers investment house, Fed backers say.
"It might have been the Fed's finest moment when it had to jump into the market," said David M. Jones, a former Fed economist and president of DMJ Advisors, a Denver-based consulting firm. "We still have to wait to see how effective the Fed is in its exit strategy and whether it can keep inflation in check. But this badgering by Congress, even if there is populist sentiment, is inappropriate."
The Fed's aggressive intervention also set the stage for the current criticism. Many lawmakers question whether the Fed's money machine has mainly benefited financial markets and not the broader economy. Lawmakers are also peeved that the central bank acted without congressional involvement when it brokered the 2008 sale of failed investment bank Bear Stearns and engineered the rescue of insurer American International Group.
Bernanke, first appointed by President George W. Bush, has worked closely with both Treasury Secretary Timothy Geithner and Bush Treasury Secretary Henry Paulson in confronting the worst financial crisis in decades. Geithner also has gotten his share of congressional wrath, mainly for his administering of the $700 billion bank bailout fund.
"In the past, the Federal Reserve was held in very high esteem," said Rep. Ron Paul, R-Texas, a libertarian who twice ran quixotic presidential campaigns and remains a darling of skeptics of Washington. Now, it's "the source of our problem," suggests Paul, author of the best-seller "End the Fed."
Usually an outlier, Paul suddenly has found an army of at least 307 House colleagues and 30 senators marching behind his legislation to subject the Fed to intense scrutiny by Congress' Government Accountability Office. The House Financial Services Committee endorsed Paul's approach 43-26 last week over objections from its chairman, Rep. Barney Frank, D-Mass.
The bill would authorize Congress to audit not only the Fed's lending programs but its basic decisions to set monetary policy by raising or lowering interest rates. Paul has been introducing a version every year since the early 1980s, but this is the first time it has garnered any serious attention.
Senate Banking Committee Chairman Chris Dodd, D-Conn., who will preside over Bernanke's confirmation hearings, has proposed legislation that would strip the Fed of its bank-regulation authority and give the Senate a role in selecting the 12 regional Federal Reserve bank presidents.
Dodd says his measure would return the Fed to its core mission of setting monetary policy, claiming it proved itself "an abysmal failure" by not cracking down on risky lending practices that led to the financial meltdown.
Dodd is in an extremely tight battle for re-election, even though he has served in Congress for 35 years.
"I don't think it ever hurts to have a member of Congress stand up and denounce the Fed. There is a lot of anger out there, and this is basically a therapeutic gesture," said Ross Baker, a political scientist at Rutgers University.
Still, Baker said, it probably isn't wise to tamper with the formula that makes the Fed "very much an anomaly in American government. It's independent, it has to be. You don't want the Fed to be under the control of the president. And it kind of sits out there - not in the executive branch, not in the legislative branch, not in the judicial branch. Sort of its own little element in the separation-of-powers constellation."
While the Fed is subject to some congressional oversight, its decisions don't have to be ratified by the president or Congress. Fed officials are not paid with money appropriated by Congress.
Should Bernanke be worried?
"Not only should be worried, he's clearly ratcheted up his game in terms of his communications with Congress," said Norman Ornstein, a senior fellow at the American Enterprise Institute.
Ornstein said the Fed bashing this time is different from before, with "a broader base of support. And it's coming from people who in the past would not have hit the Fed. There's a lot of populist anger out there - on the left, in the center and on the right. And politicians are responsive to that."
33 Comments so far
Show All"While the Fed is subject to some congressional oversight, its decisions don't have to be ratified by the president or Congress."
How is this constitutional?
How is it conducive to true democracy?
True democracy? Cluck cluck Ed. The neo-libs and their cheerleaders will retort that the USA was never intended to be a democracy. It's only a "republic," which is way better. :D
Democracy is only for when we need to export it.
...said Ross Baker, a political scientist at Rutgers University.
Still, Baker said, it probably isn't wise to tamper with the formula that makes the Fed "very much an anomaly in American government. It's independent, it has to be.
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"...It's independent,..."
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they gave up their independence $700B dollars ago... ($12T if you count the backstops)...
let the banks... who essentially are the Fed... buy back their damn "independence"... with penalty & interest... a few years time would be good measure too...
once bankers started gambling with taxpayer backed deposits... they waived their "independence"...
if your kid blows $500 he earned working part time on the big game... that's his problem...
if your kid blows $500 on the big game from funds from your credit card... that's your problem...
we need indictments...
trials...
convictions...
time served...
then... they can have "independence".
man! THIS is absolutely the crystal-clear truth and perfectly concise expression of HOW IT IS AND HOW IT OUGHT TO BE! DAMN IT-IT'S OUR GOVERNMENT-LETS TELL 'THEM' HOW WE WANT IT RUN!
The privately owned and operated Federal Reserve System should be nationalized and banks should borrow money from us if they need it, not the other way around.
Why should we pay interest on our own money? The money that is produced is backed by the full faith and credit of the United States ... Not private banks.
Since the inception of the Federal Reserve System in 1913 it has been feast and famine, boom and bust ... they whipsaw the system to generate profits until they go too far, cause a crash and then tax payer has to pick up the bill and workers and Main Street get screwed.
The power of money and credit creation was granted to the people in the Constitution ... but has ended up as a monopoly of money and credit creation for greedy private interests that abuse us with currency manipulation, bubbles and crashes ...
We must nationalize the Federal Reserve System and return the power and profit of money creation to its rightful owners. the people of the United States of America ...
a frickin' men!
Allow me to suggest the book "Web of Debt: The Shocking Truth About Our Money System and How We Can Break Free" by Ellen Hodgson Brown.
Plenty of her articles can be found through her author index at www.globalresearch.ca and surely at her website, www.webofdebt.com. She recommended a couple of relevant documentaries and I'm not sure what the other was, but one is definitely, "The Money Masters", which can be found at Google videos. It's a little over 3.5 hours long and is in two parts at Google videos. It provides a very good and important historical review of the Federal Reserve.
There's a 215-minute clip, so full length clip, at freedocumentaries.org. That clip appears in a pop-up window for an embedded copy of the full-length clip from Google, but the popup window is large and doesn't work well for viewing for me, though might for other people. There's a much more normally sized embedded Google clip, also full-length, at topdocumentaryfilms.com.
Thank you Mike. I have watched a few things on that freedocumentaries.org site. Didn't know she had one on there. It will also be nice to read some subsequent smaller articles from her, too.
That book was so interesting and informative, I absolutely blazed through it.
The documentary, "The Money Masters", is not by Ellen Brown. I only said it's one of two relevant documentary films she recommended; explicitly, clearly, and emphatically enough. She's right too. I viewed the full film of "The Money Masters" and definitely recommend that other people also view it, fully. People not wanting to view the full length clip online, but would prefer to view it in two clips, can find a two-clip copy at Google videos; if that copy is still there, which I guess it should be.
I cannot possibly vouch for everything said in the film, but it provides relevant and interesting historical review starting as far back as the or at least a likely reason for the assassination of emperor Caesar, Julius. Ancient historical review is a small portion of the whole film, but nevertheless is interesting and even relevant. Most of the film is on history starting with the first Rothschild power- and wealth-mongering, and government-corrupting, schmuck, onward. A good amount of the film, up to the end of it, is about the Federal Reserve in the USA, but just before getting into that history, the film also looks at the assassination of President Abe Lincoln, and an attempted assassination on the subsequent or one of the soon-after U.S. Presidents, because of their positions regarding U.S. monetary policy and the need for economic justice for the general population; instead of only or mostly profit for the elites and poverty for many citizens.
This is yet another article that barely scratches the surface of the true nature of The Fed. The Fed is this nation's monetary system, privatized.
Note Ross Baker's disingenuous statement that "it kind of sits out there - not in the executive branch, not in the legislative branch, not in the judicial branch. Sort of its own little element in the separation-of-powers constellation." Yeah, it's "sort of" its own little privately controlled central bank, which gobbles up in excess of $400 billion annually of Americans' wealth, by virtue of its 6% guaranteed interest on money it prints (at virtually no cost) and loans to the federal government; and this by virtue of the terms of that insidious piece of stealth legislation - the Federal Reserve Act of 1913. Except the Fed is anything but little; wielding as it does more power than all three branches of government together. Yes, that's because it owns them all.
The Federal Reserve Act should be repealed; the Fed eliminated. We don't need to nationalize it, whatever that means; we need to kill it. We need a not-for-profit loan institution that serves people, not for-profit banking that serves private or corporate shareholders.
In any case, an audit of the Fed, in and of itself, doesn't guarantee any truth or substantive change. I'd expect no more than a token forensic audit, followed by some token changes in the Fed's administration.
The Fed - a Conglomeration of PRIVATE ENTITIES, PRIVATE BANKERS -- should not be allowed to exist.
when they claim it needs its "independence" -- they are simultaneously obscuring the fact that its VERY existence as a PRIVATE CONGLOMERATE of PRIVATE BANKERS setting economic decisions - IS essentially "not independent" but in fact DEPENDENT on the interests of
PRIVATEERS - who work against the public interest.
they are only "independent" in so far as they are not accountable TO THE PUBLIC whose economic life is MANIPULATED by
these PRIVATE Entities.
it should not be allowed to exist.
if central banking has to be necessary for a country - it has to be a PUBLICLY owned bank.
period.
YES,YES, YES, YES!!!!
Fed Under Fire As Public Anger Mounts
good
Raum sez: "The Fed's very independence and its unique ability among U.S. institutions to create money out of thin air enabled it to act quickly to stabilize the nation's financial system after it froze up ..."
***
Lemme get this straight ... the Fed "stabilized" the economy by creating money "out of thin air"?
Does anybody else see this system as somewhat divorced from reality?
Anybody?
Bueller?
Should we continue to hold these Neo-Confederate IOU's?
Put the Fed to bed.
Remains to be seen. Congress's job is to deflect public anger away from their masters.
Readers who say the Federal Reserve needs to cease to be in private banksters' hands, control are right. For the need to either eliminate the FR or make it part of the govt with only the Congress having authority over monetary policy, refer to my above post in which I refer to "The Money Masters" and provide links to two websites for online viewing of the full documentary film.
"Sort of its own little element in the separation-of-powers constellation."
Where in the Constitution of the United States does it even mention the privately-owned Federal Reserve Bank? Is this guy Ross Baker on the payroll of the Federal Reserve or did he forget that the Constitution only mentions three "co-equal" branches of government: Executive, Congressional and Judicical?
There is no mention of some privately-owned "element" that was given power over any branch of this government.
No Constitutional amendment was ever created or voted on to accept the Fed; and its Constitutionality has never come before the Supreme Court.
AMEN-YEAH! We ALL desperately need to raise our voices on this issue over and over, non-stop, 24/7 365/year until this gets righted!
When one realizes the shady way the federal reserve act of 1913 was sneaked through congress for wwilson to sign as HIS requriement for becoming president anyone should doubt the legality of passing anything in such a manner and anything done as such should be revoked, undone and forever forbidden and I believe it was Ben Franklin that stated that private central banking was a huge reason for fighting the revolutionary war and that several more attempts were made and denied before the 'secret' bankers set up the ruse to get ww to sign the federal reserve act of 1913 into law.
In short, the federal reserve act should never have been passed or signed into law and it sure has done more than enough damage to this country's economy for the benefit of those few who just cannot seem to make and honest buck. Good luck america.
Isn't it insane that we gave the PRIVATE Fed and banks the power to create money, then loan it back to the government and the rest of us charging interest. Then we have to pay income taxes to pay the interest on the debt? We could save 40% of our collective productivity if only we cut private bankers out of the middle of mortgages and govt spending. Many problems solved if this were done.
After the worst crash in 80 years, deliberate asset inflation (houses), biggest extortion ever (threat of financial collapse), the FED secretly bailing out big banks, and individual bankers running off with all the money, it is clear this is a scam where banks buy our politicians and count on our continuing to be dupes.
This concept of an "independent FED" is a bogus attempt to fool us into thinking they serve a worthwhile purpose. We could create a public banking system that protects us from fiscal irresponsibility without this corrupt private entity that insures 95% of wealth ends up in the hands of 1% whom also collect 70% of all compound interest.
Absolutely right!
Excellent article, and amusing comments.
I find it amusing that, Feds are now playing with Monopoly money, hence have Zero relevancy in peoples lives who are engaged in proper trade of goods and services. These guys have shown their true board colors.
Where rubber hits the road with money is in the real transactions occurring in neighborhoods. Each neighborhood dictate value of money based on goods and service exchange.
toophat for you!
dumddown old fart
Congress should supervise the Fed.?
Is it wise to allow Congress direct access to the money vault? They will then be able to obtain campaign cash without depending on corporations, PACs, and citizens to act as middlemen between taxpayer $$ and corporate "donations".
Is is wise? Perhaps not.
However, it is wiser than the current situation, of having the people who do have access to the money vault, be under no supervision and be unaccountable.
"Independent" "experts" are grossly overrated. "Independent" simply means no accountability.
Bank = bad. Bankers = Very bad. Traitors, they are. Hanging, they deserve. Creation of credits, benefit the people it should. Corporate sector should be abolished.
Its great to see the comments that expose the FED for the private economic manipulation for the benefit of the financial elite at the expense of the people.
The question is, what do we do about it? Dr. Paul's effort and Sen Dodd's are on track but I fear that the powers that be will find a way to kill those efforts or water them down to ineffectiveness. Just look at how close Mel Watt came last week to negating Dr. Paul's bill in the congress.
So, I've been examining the question - what can we do about it and I have come up with only one answer.
Its all about waking up the people of this country. I see a slow awakening but I fear it will not be fast enough and not in enough numbers to overcome the significant power that we face.
If I could wave a wand, I'd develop and launch a national education campaign that starts with the fundamentals of what is going on.
The people need to know:
that the FED is private, run by the big banks and we have absolutely no oversight into what they do with trillions of our dollars. As was so correctly stated in another comment here, the Constitution established three branches of government with checks and balances - nowhere did it establish a forth branch that would manipulate the economies, serving bankers, with absolutely no check and no balance - no accountability to the public.
how the banks create money out of thin air - legal counterfeiting - "Fractional-Reserve Banking" where banks create money to lend out of thin air and charge interest for it. Amazing! What a deal!
how legislation in congress is written by corporate lobbyists for the benefit of big banks and big business, and often at the expense of the people. Watch the movie "Food Inc" and other powerful documentaries that illustrate this.
how banks and corporations,entities in our so-called democracy with enormous power in our government, are not human. They have no conscience, yet they wield far more power and influence than do the people. Their moral direction is taken by what ever will serve the stockholders, feed their growth and maximize their profit. Any costs, like the deterioration of the health of the society, the environment, and the fundamental liberty of the people, that do not register on the balance sheet are of absolutely no concern. These critical costs to the people are insignificant to these profit machines.
how so-called journalists are failing to inform the people of the truth. Instead they help perpetuate the lies and drown out the voices that proclaim the truth.
We need to develop a core curricula that lays out theses truths in the simplest of terms and then we need to systematically roll it out across the US, from local, county, state, and national rooftops; using media in movies, music and the arts to make sure that is is heard.
When we have completed the campaign, and have woken up enough people in majority numbers, then we can mobilize and organize and leverage the power of our Constitution to take back our democracy.
Who's with me?
The FED should be under the control of the Congress. It's the only way Congress will get any of its teeth back. Besides, unless our currency and bank policies are under the control of democratically elected representatives our currency will be no better than 'plantation scrip' where allegedly freed slaves are paid by the plantation owners with a form of currency that is honored nowhere else but at the company store, and manipulated specifically to keep the sharecroppers in debt. Unless currency is the property of 'we the people' we are slaves, no matter what kind of horseshit they try to feed us about 'free markets'.
Anger is building like the pressure in a sealed pot there is no escape for the mounting pressure. Lack of organization and powerlessness make action unlikely, ineffective. The super rich don't care if we demonstrate and we know that. They plan to steal still more from us and we know that. If they know this they show no signs of knowing.
This is a silly,stupid typical US mainstream media report talking about the Fed as a punching bag. The people of this country have been the punching back for the super rich power elites primarily on Wall Street.
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