Ben Bernanke Wants To Maintain Fed's Secrecy—I Mean, "Independence."

Ben Bernanke promises to tell lies, big lies, and nothing but lies, so help him Alan Greenspan.

Last night I watched Bernanke on the Record on PBS, which originally aired over the summer. At one point during the Q&A session with the audience, the chairman of the Federal Reserve said the following:

“The independence of the Fed is extraordinarily important. If the Congress or the Administration were to begin to interfere with our monetary policy decisions, then the markets would say, ‘Well, wait a minute, is there going to be more inflation because of political reasons? Is there going to be more inflation because the government wants the Fed to print money in order to pay for the deficit?’ So it’s incredibly important that the Fed maintain its independence. I think we will. I think we need to be very vigilant and make sure that there isn’t any bill or any other effort made by anyone to take away that independence and we’re going to do our best to maintain it because it is so critical for the stability of our economy.”

It all makes sense now. Under the circumstances, Bernanke is saying that Congress shouldn’t be allowed to pressure the Fed into making reckless monetary decisions because the Fed is already doing that all by itself. This entire decade has been one giant Fed-driven clusterfuck of easy credit and corporate excess. Public and private debt has skyrocketed over the last ten years as America and Americans have spent themselves into financial oblivion. And what’s Bernanke’s solution? More spending! That’s right. Not just by the government. No. The Keynesian stimulus package signed into law in February wasn’t enough. Bernanke and Barack Obama want you to spend your money, or what’s left of it. That’s why interest rates are around zero at the moment. Obama, Bernanke, and Geithner are trying to fabricate a seller’s market where there isn’t (or shouldn’t be) one. Can you think of a worse economic strategy than having interest rates at 0% in a nation of debtors while the government is burning the midnight oil at the Bureau of Printing and Engraving to pay for two wars, the stimulus, a scandalously large military budget, etc.?

Despite Bernanke’s protestations, those favoring Fed transparency earned a small victory last week when the Paul-Grayson amendment was approved by the House Financial Services Committee, tacking it on to H.R. 3996—a gigantic banking regulation bill in the works in the House of Representatives. The amendment:

• Removes the blanket restrictions on GAO audits of the Fed

• Allows audit of every item on the Fed's balance sheet, all credit facilities, all securities purchase programs, etc.

• Retains limited audit exemption on unreleased transcripts and minutes

• Sets 180-day time lag before details of Fed's market actions may be released

• States that nothing in the amendment shall be construed as interference in or dictation of monetary policy by Congress or the GAO

As you can see, the Paul-Grayson amendment specifically states that neither Congress nor the Government Accountability Office shall interfere in monetary policy (which is kind of too bad since I don’t think Congress or the GAO could do any worse of a job than the Fed is doing now).

Mike Shedlock sums up the situation thus:

“The measure, cosponsored by Reps. Ron Paul (R-Texas) and Alan Grayson (D-Fla.), authorizes the Government Accountability Office to conduct a wide-ranging audit of the Fed’s opaque deals with foreign central banks and major U.S. financial institutions. The Fed has never had a real audit in its history and little is known of what it does with the trillions of dollars at its disposal.”

Speaking of Alan Grayson and the Federal Reserve’s “opaque deals with foreign central banks,” this classic clip came to mind. In it, Grayson asks Bernanke which European central banks got $500 million of U.S. taxpayer money and at one point laughs in the chairman’s face.



Go get ‘em, Alan and Ron.

- Max