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Even the Fed may face stress tests
The Federal Reserve Building in Washington, D.C.
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TEXT OF STORY
Kai Ryssdal: Now that Wall Street banks seem to have survived those government stress tests of a week or so ago, there's an interesting idea floating around up on Capitol Hill. Some unlikely political allies are pushing a piece of legislation that calls for a full-scale audit of the Federal Reserve. A stress test for the Fed, if you will, and its 12 regional banks. The big worry about Wall Street, if you remember, was that their balance sheets wouldn't be able to stand up to an even more sour economy. Now some are having the same question about the Fed. Since the financial crisis really got going, Bernanke and Company have been spending money like it's going out of style. From Washington, Marketplace's Steve Henn reports.
STEVE HENN: Congressman Ron Paul originally proposed the bill to audit the Fed's recent $2 trillion spending spree.
RON Paul: The whole point is we don't know exactly what they have done.
But this Texas Republican with libertarian leanings has an unlikely ally in the Senate.
BERNIE Sanders: It goes beyond political ideology.
Sen. Bernie Sanders is a socialist from Vermont.
Sanders: The bottom line here is you have an institution, which is cloaked in secrecy, which has enormous power over our country. And the American people have a right to know what is going on there.
Their bill already has attracted 149 co-sponsors. James Hamilton is an economist at the University of California Santa Barbara. He says an audit is a good idea.
JAMES Hamilton: By the very nature of what they are doing the Fed is much more directly involved in the allocation of credit and deciding where money is going to go.
Since the financial crisis began, the Fed stepped in to save giant insurer AIG. It supported the commercial paper market. It's even propping up the market for auto loans. In other words, the Fed's picking winners and losers. And in a recent speech, former Fed Chairman Paul Volcker says that's bound to attract the attention of Congress.
PAUL Volcker: I don't think the political system will tolerate the degree of activity the Federal Reserve has undertaken.
But some economists worry as politicians get more involved, they may try to interfere in monetary policy and undermine the Fed's independence.
In Washington, I'm Steve Henn for Marketplace.
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i've always had a pet peeve against the study/mathematics of economics since high school. the notion that their is a cost continuum that educated people get entrenched and so mummified by, blows my mind as far as the sheer flagrant ignorance of it. do educated people really not see the fallacy of how we've practiced economics all these years?? and to tangle it up even more with something like the fed??? sure their can be a study of it, but to present a non sentient thing and pretend it has a life of its own??? come on! bring the prices down all around on everything. we have to re-invent the front part of this well traveled wheel. I don't respect the study and practices of economics as if it has life. human being put into place. we control it, but a rich man is too drugged up on his windfall profits, forever yearning and coupling the next hit
i've always had a pet peeve against the study/mathematics of economics since high school. the notion that their is a cost continuum that educated people get entrenched and so mummified by, blows my mind as far as the sheer flagrant ignorance of it. do educated people really not see the fallacy of how we've practiced economics all these years?? and to tangle it up even more with something like the fed??? sure their can be a study of it, but to present a non sentient thing and pretend it has a life of its own??? come on! bring the prices down all around on everything. we have to re-invent the front part of this well traveled wheel. I don't respect the study and practices of economics as if it has life. human being put into place. we control it, but a rich man is too drugged up on his windfall profits, forever yearning and coupling the next hit
Thank you NPR for covering HR1207! I normally do not listen to your stories because you typically are not deep enough in your scrutiny over government operations. This is a step in the right direction, but more has to be done. Please have more articles like these.
One more thing; your last comment about "independence" for the Fed, as others have stated, is a joke! There is no reason why our government should have a monopoly on the money supply, nor any reason for an unconstitutional fourth-branch of government to not be transparent. Please don't entertain the notion of government "independence" again; it's entertaining tyranny, plain and simple.
Thank you for covering this story. It's CRAZY that the Federal Reserve can hide behind the notion of "independence". Every other rationale for how power works in our country is "checks and balances, checks and balances". But for the FED, the most powerful Bank in the world which is in charge of OUR money, it's "independence". Explain that.
The Fed is the reason for this current financial crisis and the Fed created the bubble that led to the great depression. No one should be bailed out. They need to CUT spending, bring the troops home now. How about Ron Paul in 2012? He seems to be the only one who isn't clueless.
"..as politicians get more involved, they may try to interfere in monetary policy and undermine the Fed's independence." The final thought of this broadcast: America, your elected officials shouldn't ever get involved in regulating your currency. Stunning statement. The Fed has been undermining American independence for 96 years.
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