Bankruptcy

Comments on the Federal Reserve

By J. Michael McBride

Despite the unprecedented action taken by the federal reserve in the last year, there has been little debate over this exertion of federal power. Here is one article entitled “Fed has Abandoned Monetary Policy” which comments on that issue, to some limited degree.

“SAN FRANCISCO (Reuters) - The Federal Reserve has embarked on a campaign of unsupervised industrial policy to end the country's financial crisis, a move that could undermine its independence, a former top U.S. official said on Saturday.

John Taylor, who was under secretary of treasury for international affairs from 2001 to 2005, said the explosive growth of the Fed's balance sheet since September was ‘unbelievable.’…The Fed's balance sheet has more than doubled in size to over $1.2 trillion in recent months as it has tried to shield the U.S. economy from the worst financial crisis since the Great Depression by supporting key credit markets…."If you have a situation where the Fed is borrowing to invest in all these sectors it seems to me you have a huge governance issue...that demands a lot of thought," Taylor said.

Taylor said the U.S. Congress has a legitimate right to demand a say in who the Fed lends money to. The outcome would be "radical reform" that would risk monetary policy independence, he said.”

Here is a link to the full article:
http://uk.reuters.com/article/companyNewsMolt/idUKTRE50306H20090104

Michael

Full post as published by Texas Lawyer Blog on January 05, 2009 (boomark / email).