Common Sense
Nominations That Really
Matter
Mar. 3 2011 - 3:10 pm
By MALLORY FACTOR
What if I told you that there is a secretive organization that operates
in America and influences geopolitics more than almost any other
organization on earth? An organization that controls trillions of
dollars -- and affects many aspects of your daily life, whether you own a
home, how much your mortgage is, and how much your money makes in the
bank? An organization that holds its meetings in secret and that is
ruled by people who, once appointed, are basically accountable to no
one? Without meaning to sound conspiratorial, there is such an
organization: the Federal Reserve. Its seven Governors are some of
the most powerful people on earth.
The American people are highly critical of the Federal Reserve and of the
Fed’s policy of quantitative easing in particular, which received only a
27 percent favorable rating in a recent Bloomberg poll. Many
economists say that the Fed’s easy credit in the 1990s and early 2000s
created the dot-com and housing market bubbles. And we just
recently learned details of how the Fed secretly bailed out foreign
central banks using billions of our dollars. But despite these
sharp criticisms of the Fed, America still is not paying sufficient
attention to what the Fed does and how it does it.
For example, did you know that Kevin Warsh is resigning from the Federal
Reserve Board of Governors, seven years before the expiration of his
term? This should be big news because it means that President Obama
will have filled every Presidentially-appointed seat on the Federal
Reserve Board, except for one. Given the Fed’s impact on every
aspect of our economy and our prosperity, you’d think this would be at
least as big as the Super Bowl or the Oscars.
Both the American people and Congress have always paid much more
attention to Supreme Court Justice appointments than to Fed Governor
appointments. Although the Chairman of the Fed, Ben Bernanke, is
well-known, few Americans pay attention to the other Governors, even when
they are appointed. But now that real power over our economy rests
in the Federal Reserve, we ought to change that. After all, the Fed
Governors have a major impact on the US, the global economy, inflation
and money supply, whereas the Supreme Court Justices actually have more
limited powers.
The Federal Reserve was created to ensure the stability of our financial
system and lessen bank panics. But since the recent financial
crisis, the Fed has assumed huge responsibilities over almost all aspects
of Americans’ economic lives. The Federal Reserve used the crisis
to make an enormous power grab, in part by suggesting that it is the only
part of our government smart enough to grapple with the complexities of
modern American finance and the financial crisis. Today, the
Fed also controls the money supply. Inflation.
Unemployment. Banking regulation. Our currency. Interest
rates. Risk management. Consumer credit.
Yet as an independent central bank. the Federal Reserve operates under
minimal oversight by Congress -- its power is largely unchecked by
Congress, the Administration and the courts. Furthermore, the Fed
Governors are given long terms (14 years) to insulate the central bank
from political pressures. Like judicial appointees, Fed Governors
can be removed only for malfeasance, not for policy views inconsistent
with the sitting President, the governing party or the will of the
people. So it is important that we take our one opportunity to
evaluate the potential Fed Governors -- during the confirmation
process.
Rightly or wrongly, we accept scrutiny of Supreme Court nominees as
a part of modern American political life. Why don’t we accord the
same scrutiny to Fed nominees? When will the Chamber of Commerce or the
AFL-CIO take out ads on FoxNews or CNN or place opinion pieces in the
Huffington Post or biggovernment.com to discuss the views of Fed
nominees? After all, it’s not as though the issues with which
the Fed deals are any less important than those in the courts.
In the coming years, the Fed Governors will confront a looming debt
crisis, mounting inflation, and persistent unemployment. The
Federal Reserve Board will impact our economic future more profoundly
than at any other time in history.
We need to give the nominees to the Federal Reserve Board far greater
scrutiny. We must learn what their views are and what powers they
want the Fed to exercise over our American way of life. It is
true that the appointment of one Fed governor, Peter Diamond, has not
been brought to a vote for almost a year because of opposition in the
Senate. But the press and nation as a whole have not paid much
attention to this matter.
It’s time for a real debate on these important economic issues from all
sides, and the upcoming confirmation hearings for Diamond and Warsh’s
replacement provide a perfect opportunity. The American
people and Congress must carefully examine Fed nominees and ensure that
these nominees’ views and outlooks will enable to a bright economic
future for America.
http://blogs.forbes.com/malloryfactor/2011/03/03/nominations-that-really-matter/
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