The Fed As “Market Stability Regulator”
The New York Times, like many other papers, has an article about Bush’s plan to turn the Federal Reserve in the “market stability regulator.”
There were many writers writing of the pending meltdown (including me) while the Fed and the Bush administration and real estate interests continued to maintain that there was no problem at all.
How can the Fed prevent a problem when 1) they are the problem, and 2) they can’t see a problem before it’s a crisis?
But the Fed would not be able to act simply because one bank or brokerage house was taking excessive risk. Instead, the Fed’s “authority to require correction actions should be limited to instances where overall financial market stability was threatened,” the proposal states.
The Fed has long had great prestige in Washington, but in the current crisis it has seen its decisions challenged from both the left and the right.
“The Fed oversaw this meltdown,” said Michael Greenberger, a law professor at the University of Maryland who was a senior official of the Commodity Futures Trading Commission during the Clinton administration. “This is the equivalent of the builders of the Maginot line giving lessons on defense.”
Anybody who takes a little time to read the history of the Federal Reserve and understand how our banking system operates can see how this happened. The Fed has been creating boom and bust cycles for close to 100 years. This is just the latest. Is it wise to put the fox in charge of the hen house?
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