http://rawstory.com/blog/2009/09/fed-rejects-geithner-request-for-public-review/
The institution which creates and oversees America's currency
wants to keep a "low profile," according to a published report on
Monday, and may willing to dodge the U.S. Treasury in order to do
so.
According to Bloomberg News, the Federal Reserve Bank will
not submit to a voluntary public study of its internal structure
and methods of governance, as it was requested to do so by Treasury
Secretary Timothy Geithner.
Geithner is the former New York Federal Reserve Bank chairman.
The review he requested is part of President Barack Obama's
financial regulatory reforms, which he proposed in mid-June. Part
of those reforms would have studied the Fed's "ability to
accomplish its existing and proposed functions" -- a proposal the
bank's board of governors appears to have flatly rejected.
"The agency also said that while the report requested by
Secretary Geithner and his department has not yet been scrapped, no
work has been done on the project, which is due Oct 1," noted Reuters.
"The institution is trying to keep a low profile," Vincent
Reinhart, a former Fed monetary policy director, told Bloomberg.
"To publish a report now invites comment on that report."
And comments are the last thing the Fed wants right now.
Under fire
The Federal Reserve has been under growing political fire ever
since Congressman Ron Paul (R-TX) made it a frequent target during
his presidential campaign. However, Paul has been a longtime
opponent of the bank, openly calling for it to be abolished and the
U.S. dollar to once again be backed by gold, instead of mere
faith.
"From the Great Depression, to the stagflation of the seventies,
to the burst of the dotcom bubble last year, every economic
downturn suffered by the country over the last 80 years can be
traced to Federal Reserve policy," Paul said in 2002, according to
congressional records. "The Fed has followed a
consistent policy of flooding the economy with easy money, leading
to a misallocation of resources and an artificial 'boom' followed
by a recession or depression when the Fed-created bubble
bursts."
His bill, House Resolution 1207, which would subject the
Fed to a complete audit, has gained significant traction in the
U.S. House of Representatives, with over half its members signing
on in support of the move. Though mostly Republicans, a large
cross-section of Democrats reached across the aisle to support the
bill, and Rep. Barney Frank (D-MA), who chairs the House Financial
Services Committee, recently told a town hall audience that the Fed
will be subjected to a complete audit soon. He predicted the House
will pass Paul's bill -- or an amalgam of it, wrapped with other
regulatory reforms -- "probably in October."
"A companion bill in the Senate introduced by Sen. Bernie
Sanders (I-Vt.) has 27 cosponsors," noted The Hill.
The Fed has also come under fire for refusing to disclose which
firms it paid massive bailouts to in 2008 and early 2009, amid the
greatest financial crisis since the Great Depression. A particular
amount of interest among lawmakers has focused on the Bank of
American - Merrill Lynch & Co. merger, which the Fed
facilitated.
The House Domestic Policy Subcommittee, under the leadership of
Congressman Dennis Kucinich (D-OH), subpoenaed the Fed in June for records relating
to the transaction. New York Attorney-General Andrew Cuomo has
claimed that, in 2008, then-Treasury Secretary Hank Paulson and
Federal Reserve Chairman Ben Bernanke strong-armed BofA into buying
Merrill -- a move that, if true, could expose Paulson and Bernanke
to prosecution. That investigation is under way.
Fed Chairman Ben Bernanke "has vehemently opposed the idea [of
an audit], asserting that it would lead to the politicization of
monetary policy by giving Congress an easy way to second-guess any
decision the Fed makes," noted The Los Angeles Times in late
August.
That specific argument -- that the monetary system is endangered
by closer observation of Fed actions -- was discounted by Judge Loretta Preska of the Manhattan U.S.
District Court, in a ruling that ordered the Fed to disclose
which firms received bailout dollars.
While the Fed argued that disclosing who was bailed out on the
taxpayer's dime could be detrimental to the agency's independence
from Congress, Judge Preska wrote that the claim was based merely
on "conjecture" and the court remained unconvinced because the Fed
had failed to provide adequate evidence to substantiate its
claims.
"[The] risk of looking weak to competitors and shareholders is
an inherent risk of market participation; information tending to
increase that risk does not make the information privileged or
confidential," she wrote.
-- Stephen C. Webster