Audit the Fed: Don’t Increase it’s Power

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The Warden is handing over control of the asylum to the inmates while claiming to be adding more guards. At least that’s a good comparison to the proposed new powers President Obama wishes to give the Federal Reserve, or according to Bloomberg News, “Chris Dodd quoted one critic’s view that giving the central bank more power was like awarding a son a ‘bigger, faster car right after he crashed the family station wagon.’”
Tim Geithner, current Treasury Secretary and former President of the New York Federal Reserve Bank, said that the Fed has “greater knowledge and feel for broader market developments” than any other U.S. banking agency and added that giving those powers to a council of regulators wouldn’t work, “You don’t convene a committee to put out a fire,” he added. True, you don’t convene a committee to put out a fire, but you also don’t hire a group of arsonists to work at the Fire Department.
President Obama’s plan would “Create a Financial Services Oversight Council” to “facilitate information sharing and coordination, identify emerging risks, advise the Federal Reserve on the identification of firms whose failure could pose a threat to financial stability due to their combination of size, leverage, and interconnectedness, and provide a forum for resolving jurisdictional disputes between regulators” and would “give the Council the authority to gather information from any financial firm and the responsibility for referring emerging risks to the attention of regulators with the authority to respond.” Among other things, the plan would also “Create a New Consumer Financial Protection Agency” with powers to “protect consumers of credit, savings, payment, and other consumer financial products and services, and to regulate providers of such products and services. The CFPA should have broad jurisdiction to protect consumers in consumer financial products and services such as credit, savings, and payment products. The CFPA should be an independent agency with stable, robust funding,” and “should enforce fair lending laws and the Community Reinvestment Act and otherwise seek to ensure that underserved consumers and communities have access to prudent financial services, lending, and investment.” Wait, to combat bad lending practices by banks and other financial institutions, the President wants to create new agencies to oversee lending practices of financial institutions “too big to fail” by enforcing the law that was used to require the issuance of bad loans, to begin with? Does anyone else have a headache? Senator Jim Bunning asked, “What makes you think that the Fed will do better this time around?”
Now, we stand at a cross-road. The one road leads to more government regulation that will not prevent any future “credit crunch” or recession and will give a private bank more power. The other road leads to an audit of the Federal Reserve and to it’s eventual demise. I know the road I wish to travel, I pray Congress chooses wisely.