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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