That said, however, what is the alternative? Calculated Risk says we can do better. But can we, really?
It's not that hard to think of people who have the intellectual chops for the job of Fed chair but aren't fully part of the Borg. But it's very hard to think of people with those qualities who have any chance of actually being confirmed, or of carrying the FOMC with them even if named as chairman (which is one reason why this suggestion is crazy). Does it make sense to deny Bernanke reappointment simply in order to appoint someone who would follow the same policies?
I'm new to the obscure world of the Fed, but I don't think things are as hopeless as Paul assumes. "FOMC" is the Federal Open Markets Committee, of which the Fed Chair is just 1 vote. It is made up of the Federal Reserve Board, the President of the NY Fed and four other rotating regional Fed Bank Presidents. I'm guessing that in the Greenspan and Bernanke eras, the FOMC (and Fed Board itself) would back the Chair without fail. What if that changed?
I was not surprised or upset that Ben Bernanke was re-nominated to be Chair of the Federal Reserve. I mean, he's not the populist hell-raiser I would have appointed. I might have picked Andy Stern or Joe Stiglitz or Simon Johnson, had it been up to me. But President Obama is not a raging populist like I am, and he was always going to pick within a very narrow board of people like Bernanke or Larry Summers.
What I do believe about the choice is this: whoever runs the Fed, we need to open it up, air it out, and have it more democratically governed. A hyper-secret institution in great part actually governed by the big banks it is supposed to be regulating, with such vast powers it is called with great justification a fourth branch of government- this is just not a good idea. Even if one of my populist economist friends were in charge, no matter who was in charge, I would feel exactly the same way. There is simply no justification in a democratic society for an institution with the massive power of the Federal Reserve, the ability to print money at will and give it to whoever it wants to plus all the other power the Fed has, to keep the secrets it does and to be run by the very companies it regulates.
What progressives should be focused on now, especially with the push to give even more power to the Fed, is accountability, transparency, and democracy within that institution. Congress should have the right to audit the fed, we should know who they are giving their loans to, and we should be appointing consumer, labor, and public interest representations to the governing boards of the Federal Reserve and all the regional Feds as well.
Give me all that, and I won't make a single complaint about re-appointing Ben Bernanke. See how reasonable I can be?
he Federal Reserve must for the first time identify the companies in its emergency lending programs after losing a Freedom of Information Act lawsuit.
Manhattan Chief U.S. District Judge Loretta Preska ruled against the central bank yesterday, rejecting the argument that loan records aren't covered by the law because their disclosure would harm borrowers' competitive positions.
The Fed has refused to name the financial firms it lent to or disclose the amounts or the assets put up as collateral under 11 programs, most put in place during the deepest financial crisis since the Great Depression, saying that doing so might set off a run by depositors and unsettle shareholders. Bloomberg LP, the New York-based company majority-owned by Mayor Michael Bloomberg, sued on Nov. 7 on behalf of its Bloomberg News unit.
"The Federal Reserve has to be accountable for the decisions that it makes," said U.S. Representative Alan Grayson, a Florida Democrat on the House Financial Services Committee, after Preska's ruling. "It's one thing to say that the Federal Reserve is an independent institution. It's another thing to say that it can keep us all in the dark."
Good--we need to at least know what companies we are giving $1.5 trillion. The lack of transparency and democracy in all of this is awful, though not particularly surprising.
Also, nice quote from Grayson--a Better Democrat we can really be proud of. It is also worth noting that Ron Paul's bill to audit the Fed now has 282 co-sponsors. With support like that, the only reason I can imagine it hasn't passed the House is because it is opposed by the leadership.
There is a solution to all the complaining by Congress over the Obama administration's plan to give more power to the Federal Reserve. It is a solution that solves the worries people have about giving a secretive, undemocratic institution that blew it in the run-up to this financial crisis more power. It is a solution that looks at least in part to have broad bipartisan support, if one bill with 238 co-sponsors in the House is any indication. It is a solution that Democrats ought to be excited about if they take all their historic statements about government transparency and more democracy seriously.
The only downside is that it would be picking a big policy fight that directly challenges the power of the too-big-to-fail banks.
The idea is simple, has been around for a long time, should have been done a long time ago: make the Fed a more open and democratic institution, rather than the secretive one tied so closely to the big banks it is supposed to be regulating. There are a variety of ideas in this area, some of my favorites being:
The Federal Reserve Transparency Act, which now has 238 co-sponsors (weirdly a lot more Republicans than Democrats, but with 47 Democrats led by Alan Grayson). This bill gives GAO the authority to audit the Fed and report is findings to Congress.
Requiring the Fed to disclose which banks are receiving trillions of dollars to prop them up.
Taking bankers off the governing board of the regional Feds, and making sure that only consumer, labor, and public interest representatives are on the governing boards (currently, banking industry representatives or those affiliated with the banking industry are allowed to have three out of nine seats board seats for each of the 12 Regional Feds). Having those kinds of reps placed inside the Federal Reserve is important as well.
Making the Fed more transparent, and changing the governing structure so that more people than bankers are involved with it, would make it acceptable to progressives to give the Fed more power. Without that kind of restructuring, the issue will not go away, and will likely doom regulatory reform.
Opening up the Fed should be one of the major things progressives demand before they support giving them any more power.
The folks over at FDL have an action page on this, and you can add your support here.
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