"More Power To The Fed?"

Senior U.S. lawmakers launched an assault on Thursday on the centerpiece of the Obama administration's financial reform plan -- giving the Federal Reserve new powers to police broad risks in the economy.

In addition to handling monetary policy, under the Obama plan the Fed would regulate "systemic risk" and try to prevent future financial crises, working with an inter-agency council.

"The Federal Reserve system was not designed to carry out the systemic risk oversight mission the administration proposes to give it," Senator Richard Shelby, the top Republican on the U.S. Senate Banking Committee, said at a hearing.

Concluding that the Fed is better qualified than any other government agency to handle such a job "represents a grossly inflated view of the Fed's expertise," Shelby said, reflecting the rapid spread of 'Fed fatigue' on Capitol Hill.

A day after President Barack Obama unveiled his plan, Treasury Secretary Timothy Geithner was defending it in testimony before the banking committee in the first of more than a dozen hearings before Congress by mid-July.

Geithner urged Congress to act quickly on regulatory reform in response to the crisis, which has focused public and government attention worldwide on oversight of banks and markets.

Independent Senator Joseph Lieberman told Reuters he and other lawmakers were examining whether the Obama plan gives the Fed too much power. "We are going to make some recommendations about combining different existing agencies," he said.

"I would like to put more of the banking regulatory agencies together ... We ought to put together the Commodity Futures Trading Commission and the SEC."

Senate Banking Committee members with questions about designating the Fed as systemic risk regulator included Republicans Jim Bunning and David Vitter.

Shelby said the Fed could be stretched too thin by taking on the job. He questioned whether the Fed could have detected and averted problems like last year's collapse of former Wall Street giant Lehman Brothers Holdings Inc or the taxpayer bailout of American International Group Inc.  (Read Full Article)

"The most unfair practices will be banned," Obama said. "Those ridiculous contracts with pages of fine print that no one can figure out, those things will be a thing of the past. And enforcement will be the rule, not the exception."

Consumer groups hailed the plan.

"This is a dramatic shift in the focus of financial regulation, which should lead to a credit marketplace which is easier for consumers to understand and safer," said Travis Plunkett, legislative director for the Consumer Federation of America.

But banks and other Wall Street firms that earn billions of dollars on consumer financial products quickly attacked the proposal, setting the stage for what is likely to be a hard-fought legislative battle.

"We intend to take our case to Congress to explain why we believe adding new layers to a broken regulatory system is not the answer," said David Hirschmann, president of the Center for Capital Markets at the U.S. Chamber of Commerce.

The emphasis on consumer safeguards is part of the blueprint Obama unveiled formally Wednesday for the most dramatic changes in financial rules since the Great Depression.

It calls for tough new requirements on companies whose failure would threaten the economy, new oversight of complex financial derivatives and stepped-up rules for hedge funds and private equity firms.

One of its most controversial provisions is the creation of an independent Consumer Financial Protection Agency, which would assume the watchdog duties now spread across several regulatory agencies and that administration officials say are often ignored. (Read Full Article)

Section 5 of the Federal Reserve Act of 1913 states that the Federal Reserve Banks are owned, through stock issuance, by private member banks. The issue of private ownership has been one of controversy for numerous reasons.

Dennis Kucinich has repeatedly stated, "The Federal Reserve is no more federal than Federal Express" Kucinich also stated that "we need to have public control over this if we're going to have public policies in the public interest."

One of the first criticisms of the private nature of the Federal Reserve system was Charles August Lindbergh who criticized the problem of private banks working against the best interests of the citizens: "The financial system has been turned over to the Federal Reserve Board. That Board administers the finance system by authority of a purely profiteering group. The system is Private, conducted for the sole purpose of obtaining the greatest possible profits from the use of other people's money."

On November 7, 2008, Bloomberg News requested details of Fed lending under the U.S. Freedom of Information Act and filed a federal lawsuit seeking to force disclosure. The Federal Reserve response to this request was reported by Bloomberg News: The Fed responded December 8, saying it’s allowed to withhold internal memos as well as information about trade secrets and commercial information. The institution confirmed that a records search found 231 pages of documents pertaining to some of the requests.

Quite a few Congressmen who have been involved in the House and Senate Banking and Currency Committees have been open critics of the Federal Reserve, including Chairmen Wright Patman, Henry Reuss, and Henry B. Gonzalez. Currently, Congressman Ron Paul is the ranking member of the Monetary Policy Subcommittee and he is a staunch opponent of the Federal Reserve System. During each Congress Paul introduces a bill to abolish the Federal Reserve System (H.R. 2755—110th Congress, H.R. 2778—108th Congress, H.R. 5356—107th Congress, H.R. 1148—106th Congress), although he has yet to have any hearings held on his legislation or to gather any cosponsors. (Read Full Article)

     The Obama Administration's intention to give more regulatory powers to the private Federal Reserve Banks is thankfully meeting resistance in Congress from both Republicans and Democrats. In my opinion, the private Federal Reserve Banks need to be audited and regulated themselves, if not abolished. Timothy Geithner, the tax evading Treasury Secretary, was the president of a Federal Reserve Bank before his appointment and he is nothing more than a Fed shill, as I see it. The history of the Fed is one of deceit, secrecy and manipulation. More power to the Fed? Hell no!

tags: the fed  congress  politics  the economy  us recession  takebackamerica  business  

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