Time for Accountability and Transparency at the Fed

[girl gone mad]

The Time Has Come for Accountability And Transparency At The Fed
By L. Randall Wray
http://www.benzinga.com/life/politics/10/12/688434/time-for-accountability-and-transparency-at-the-fed

...

When the global financial crisis began in 2007, the Fed reacted by providing liquidity through its discount window and open market operations, later supplemented by a number of extraordinary facilities created to provide reserves as well as guarantees. Some estimates place the total amount of government loans, purchases, spending, and guarantees provided during the crisis at more than $20 trillion—much greater than the value of the total annual production of the nation. Only a very small portion of this was explicitly approved by Congress, and much of the detail surrounding commitments made—especially those made by the Fed—was clouded in secrecy.

A few days ago the Fed finally released on its website some data on its behind-closed-doors deal-making. In coming weeks I will provide more comments on what has been revealed. In this column I will only raise questions concerning the appropriateness of secret bail-outs that were provided to financial institutions, nonfinancial firms, and even individuals. Fed critics from both the right and the left have been arguing it is time to reign-in the Fed and it is certain that the next Congress will return to this issue.

Democratic Accountability and Transparency of the Fed

In this crisis, the Fed's role has dominated, with the Treasury taking a back seat. While the Fed committed many trillions of dollars to its rescue of Wall Street, the Treasury's total fiscal stimulus packages for Main Street amounted to about one trillion. Yet unlike the Treasury—whose purse strings are directly controlled by Congress--those in charge of monetary policy are not subject to the same degree of democratic accountability. Further, while the Fed's actions have become more transparent since 1994 (when Representative Gonzalez caught Chairman Greenspan in a subterfuge, leading to substantial reduction of its secrecy to comply with Congressional demands), most of its deliberation remains behind closed doors. At best, it informs Congress of its decisions after the fact. Fed officials are not elected, and by design are not subject to the will of the voters. While the Fed is a creature of Congress, current law does not provide substantive control.

Since 2007 the Fed has mounted an unprecedented effort to stabilize the financial system and the national economy. Faced with the worst crisis since the Great Depression, the Fed found that traditional monetary policy—lowering interest rates and standing by as lender of last resort to the regulated banking system—was impotent in the face of collapsing asset prices and frozen financial markets. The Fed created an “alphabet soup” of new facilities to provide liquidity to markets. It worked behind the scenes to bail-out troubled institutions. It provided guarantees for private liabilities. It extended loans to foreign institutions including central banks. The Fed's on-balance sheet liabilities grew to $2 trillion, while its off-balance sheet contingent promises amounted to many trillions more.


Read more: http://www.benzinga.com/life/politics/10/12/688434/time-for-accountability-and-transparency-at-the-fed#ixzz17qhQGCM0

[dkf]

1. I expect Ron Paul to do interesting things in this area.

[upi402]

3. This man defended wikileaks

He's like Ross Perot- just whacky enough to do something!

[sarcasmo]

2. It's going to a fun 2011 regarding the Fed.

[midnight]

4. I love the title of this post....