I think the Fed is being scapegoated to some extent, but like the CIA failures, the financial system collapse did happen on their watch and I support Congress in creating new financial oversight agencies to prevent future financial collapses (to handle “too big to fail” institutions), re-regulate the financial system and give financial consumers much more protection. Because of the greed is good mentality on capital hill with some misguided populism mixed in, I think legislators are just as much to blame as the Fed for the housing bubble. Ironically the Obama administration was leaning towards creating new oversight agencies at first but Congress pushed back however then when they came out with a plan to expand Fed oversight then Congress reacted to the populist outrage.

I don’t know any specifics about the legislation but I do think creating oversight agencies is the best tact to protect financial consumers, to re-regulate banks and expand regulations to non-banking institutions within the financial sector. Obviously it’s better political strategy to separate these powers from the Fed as well. But make no mistake there will be plenty of push-back from lobbyists and their corporatist slaves to defang this new agency as much as possible.

Senate Dems move to curb Fed’s powers

“Senate Democrats on Tuesday proposed stripping the Federal Reserve of its supervisory powers and creating instead three new federal agencies to police banks, protect consumers and dismantle failing institutions.

The 1,136-page bill, released by Senate Banking Committee Chairman Chris Dodd, would represent a significant shift in power in federal oversight of the U.S. market. The Fed has been a dominant figure in managing the economy, although many lawmakers blame the central bank for not doing enough to prevent last year’s crisis.

“We saw over the last number of years when (the Fed) took on consumer protection responsibilities and the regulation of bank holding companies, it was an abysmal failure,” said Dodd, a Connecticut Democrat.”

Ron Paul will be happy the Fed will not be part of the new agencies but his “free market” principles will prevent him from supporting the new agencies for sure.

Church-of-the-Woo-Woo 1

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I took me a little while to rev up for this post because, as a former economist, talk about the Fed just scares me silly. Monetary policy is such smoke and mirrors in my pragmatic brain. I never could see the feasibility of it, and the more I know about it, the sharper the pangs in my temples.

So I’ve kept the uproar over the Fed at arm’s length. My instinct is to nationalize the institution. But then, my instinct is to nationalize the banks. I think of our financial security as part of the commons rather than a “buy and sell” sort of product. I even think banking should be a non-profit exercise. But I guess I’m a little radical that way.

I only hope we get some real banking oversight. We need it at so many levels, from overdraft fees to multinational mergers. We’ll know how good the reforms are based on how hysterical the doom sayers become in response to the proposed changes.


Dylan Rattigan today interviewed a Congresswoman (Cantwell was the last name; can’t remember the first) who is introducing legislation to regulate the derivatives market, which, they both agreed involves many trillions of dollars. I can only imagine the awesome array of shock-and-awe-type fire power the lobbyists are going to line up against HER!


I really need to research these proposals but so far I have heard mostly good comments on them. The one problem I have with new regulations is “will the regulators be fully funded? During the S&L crises, a banker told me ” It was not due to a lack of regulations, Reagan/Bush did not fund the regulators, they didn’t have enough experienced people to look at the books.” What I would like to see is a transaction fee on every exchange on a share of stock to fund the regulators.