Tim Geithner questioned about the Ron Paul (R-TX) bill that would require the Federal Reserve to be audited had a most unusual reply.
"I'm sure people understand that you want to keep politics out of monetary policy." When Geithner is again pressed on the issue, he makes the stunning assertion that conducting an audit of the Federal Reserve—something never before done in its 96 year history—is a "line that we don't want to cross," proclaiming that such a move would be "problematic for the country."
http://digg.com/dialogg/Timothy_Geithner_1
On one hand this increases the mystery surrounding the Federal Reserve and on the other it really increases the public’s desire to want to audit the Federal Reserve. What are we being sheltered from? What is so bad that it is better to be ignorant about?
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I'll watch this later and comment after, but here's a related story from the Economist a month ago:
ReplyDeletehttp://www.economist.com/world/unitedstates/displaystory.cfm?story_id=14031460
The reason is probably because the federal reserve is not a democratic institution. I still have not heard an argument for the federal reserve. I now understand the argument for government intervention during economic downturns, but this is different than the federal reserve.
ReplyDeleteThis could be a good sign.
ReplyDeleteCourt Orders Fed to Disclose Emergency Bank Loans
http://www.bloomberg.com/apps/news?pid=20601087&sid=a7CC61ZsieV4
Appears someone took the Federal Reserve to court under the Freedom of Information Act to find out to which companies all the bailout money went and what assests were rendered in return. The Federal Reserve fought the case and lost. Let's keep our eyes on this to see which companies were deemed worthy for saving by the Federal Reserve and look at the connections.
Also interesting that "someone" is Bloomberg itself.
ReplyDeleteI'm still not sure where I stand on the Fed transparency issue. On the one hand, yes there needs to be accountability in any organization. But to whom are they accountable? To the taxpayers ultimately, yes, but are the they knowledgeable on the issues enough to really make the judgment call of what the Fed should be doing? Even members of Congress are often not qualified to pass judgment on banking practices.
Exhibit A-Michelle Bachmann:
In regards to the science of climate change, Bachmann has taken to the floor to claim that since carbon dioxide is "a natural byproduct of nature", it is actually a harmless gas. She stated that because life requires CO2 and it is part of the life cycle on Earth it cannot be harmful. Bachmann is against the cap and trade carbon tax because "Carbon dioxide is not a harmful gas, it is a harmless gas. Carbon dioxide is natural; it is not harmful...We're being told we have to reduce this natural substance to create an arbitrary reduction in something that is naturally occuring in the earth." [64]
Sorry, I can pretty much go to that quote any time to prove she's an idiot.
But a follow-up question, what kind of information is made public in regards to the Securities & Exchange commission? When banks fail and the government backs them, that information isn't made public. In fact, it's kept deeply secret. One response to the financial crisis was that a number of banks apparently had to have the government step in to secure them. NPR had a podcast about the increase, how the teams that take over banks when they're in trouble go in and act like normal employees so as not to arouse suspicions and start a run. The people can't even tell their spouses or families where they'll be going, because they might know somebody who banks there and want to tell them to get their money out. The argument they're making is essentially the same.
To me, it's a difficult situation, because as I said, everyone should be accountable, but is releasing the information to the public the best way to do that? And could releasing this information make things worse? I guess I need to better understand the Government Accountability Office functions.
I agree with you Steve that more information could likely be disruptive because many individuals, myself included, know very little about the financial sector. Also, your analogy of congresspersons via Michelle Bachman is probably accurate because they are elected by a constituency and never required to show knowledge of the financial sector either. (Brent could rant on the necessity of a test for elected officials, but not here). However, here is what I am concerned about. The Federal Reserve loaned a lot of money to a number of failing companies. We have no idea which companies, what the return incentives were, and who was connected to who. That is not capitalism and is boarder-line corruption. It is privilege at the business level where your financial books may not decide whether you survive but who you know. This is what I think we have a right to know.
ReplyDelete