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Haven't heard much from Mayer so this was welcome:
Audit the Federal Reserve System
By Martin Mayer
Two weeks ago the House Banking Committee voted to authorize periodic audits of the Federal Reserve System by the Government Accountability Office, and outrage spread through the media about the Congress usurping the authority of the Fed.
The fact of the matter is that oversight of the Federal Reserve is part of the job description of the Congress. The Constitution of the United States empowers the Congress "to coin money [and] regulate the value thereof." When he was chairman of the House Bankng Committee in the 1950s, Wright Patman liked to say that the Constitution gave the Congress full power over money, "but we have farmed it out to the Federal Open Market Committee" in the Federal Reserve System.
Not everything said by Representative Ron Paul (R, TX) need be taken seriously, but on this subject he is right on the money. The much touted "independence" of the Fed is an independence from the executive, not the legislative branch.
The Fed can write its own budget without dictation from anyone for the practical reason that printing money is profitable and the central bank always shows a surplus. But under our system of government, the Congress can no more give the Fed full policy independence than the President can resign as commander-in-chief of the Army and Navy. The legally mandated twice-yearly "Humphrey/Hawkins" reports that the chairman of the Fed makes to the Congress are an expression of ultimate Congressional responsibility for monetary policy.
In this context, one probably should note that the Fed's oft-repeated concern about populist pressures for cheap money has always been eyewash. As Bray Hammond demonstrated in his Pulitzer Prize history of Banks and Money in the United States From the Revolution to the Civil War, it's the merchant class, the builders, the shadow bankers and the government who want inflation, while the farmers and workers want stable values for their earnings.
And right now more than monetary policy is involved. Over the course of the last year and a half, the Federal Reserve has created hundreds of billions of dollars and turned them over to the big banks and the big brokerage houses and the big insurance companies of American International Group. Some of the losses that have been and will be associated with these activities-especially those associated with AIG, Lehman Brothers and the government-sponsored enterprise Fannie Mae--are expenditures of the kind the Constitution says can be made only "in consequence of appropriations." The public defense of these activities is essentially an assertion that "we were right to panic."
Even those who approve the actions doubt the process. The Fed can no longer interpose its standard claim that secrecy is a necessary part of the mystique of central banking. The American people deserve to know the details of how these decisions were made. The Congress has not just the right but the obligation to audit them.
As always imparts a lot and corrects a lot of misconceptions. (Or at least my misconceptions.)
Quoted in Chris Whalen's IRA which is surprisingly strident this week
and worth a read:
http://us1.institutionalriskanalytic...ub/IRAMain.asp
Audit the Federal Reserve System
By Martin Mayer
Two weeks ago the House Banking Committee voted to authorize periodic audits of the Federal Reserve System by the Government Accountability Office, and outrage spread through the media about the Congress usurping the authority of the Fed.
The fact of the matter is that oversight of the Federal Reserve is part of the job description of the Congress. The Constitution of the United States empowers the Congress "to coin money [and] regulate the value thereof." When he was chairman of the House Bankng Committee in the 1950s, Wright Patman liked to say that the Constitution gave the Congress full power over money, "but we have farmed it out to the Federal Open Market Committee" in the Federal Reserve System.
Not everything said by Representative Ron Paul (R, TX) need be taken seriously, but on this subject he is right on the money. The much touted "independence" of the Fed is an independence from the executive, not the legislative branch.
The Fed can write its own budget without dictation from anyone for the practical reason that printing money is profitable and the central bank always shows a surplus. But under our system of government, the Congress can no more give the Fed full policy independence than the President can resign as commander-in-chief of the Army and Navy. The legally mandated twice-yearly "Humphrey/Hawkins" reports that the chairman of the Fed makes to the Congress are an expression of ultimate Congressional responsibility for monetary policy.
In this context, one probably should note that the Fed's oft-repeated concern about populist pressures for cheap money has always been eyewash. As Bray Hammond demonstrated in his Pulitzer Prize history of Banks and Money in the United States From the Revolution to the Civil War, it's the merchant class, the builders, the shadow bankers and the government who want inflation, while the farmers and workers want stable values for their earnings.
And right now more than monetary policy is involved. Over the course of the last year and a half, the Federal Reserve has created hundreds of billions of dollars and turned them over to the big banks and the big brokerage houses and the big insurance companies of American International Group. Some of the losses that have been and will be associated with these activities-especially those associated with AIG, Lehman Brothers and the government-sponsored enterprise Fannie Mae--are expenditures of the kind the Constitution says can be made only "in consequence of appropriations." The public defense of these activities is essentially an assertion that "we were right to panic."
Even those who approve the actions doubt the process. The Fed can no longer interpose its standard claim that secrecy is a necessary part of the mystique of central banking. The American people deserve to know the details of how these decisions were made. The Congress has not just the right but the obligation to audit them.
As always imparts a lot and corrects a lot of misconceptions. (Or at least my misconceptions.)
Quoted in Chris Whalen's IRA which is surprisingly strident this week
and worth a read:
http://us1.institutionalriskanalytic...ub/IRAMain.asp