There was an article posted on CNN Money by Charles Riley recently titled “Federal Reserve: GOP’s Whipping Boy.” Predictably, it explained reasons why Republicans are crazy and why the Fed is legitimate, by asking a couple people whom no one knows and that have skin in the game. Republicans are most definitely crazy, but the problem with most news outlets with respect to the Fed is that they refuse to investigate why the Fed may be a bad thing, and instead latch on to the status quo like a zombie on fresh brain.
The first person they ask for comment is William Poole, a former St. Louis Fed president. What would you expect from this “partial” observer other than “The Fed tries as mightily as it can to make its monetary policy decisions as apolitical as it knows how to do,” which is exactly what he said. Well, one could make the case that the Fed doesn’t really know how to do anything because any decision it has made recently has been undoubtedly political, even if it is in complete denial. Riley quickly adds “Politics is not part of its mission,” which is just about as patronizing as Obama’s recent jobs speech.
“Some of the recent criticism of the Fed stems from the 2008 financial crisis and its aftermath, when the bank was forced to take extraordinary measures to help stabilize financial markets.”
I don’t think forced is how I would describe the actions of the Fed in the midst of the financial crisis. They weren’t technically forced to take any action, but only did so to appease certain favored industries and firms, including Timothy Geithner’s old fraternity, Goldman Sachs. Geithner of course, is Secretary of the Treasury, which CNN doesn’t allude to, but by reading the next proclamation, you get the picture:
“The bank made special loans, cut key interest rates and worked closely with the Treasury Department to backstop large financial institutions.” Enough said.
The next “expert” quoted in the article is Steve Bartlett, CEO of the Financial Services Roundtable whose stated mission is to “protect and promote the economic vitality and integrity of its members and the United States financial system.” Ignoring the integrity part of the mission, which is obviously pure fiction, what would protect and promote the economic vitality and solvency of the US financial system during a crisis? The answer is low interest rates (cheap borrowing), printed money, and a lender of last resort (the Fed) to prop up the egregious mistakes of financial institutions.
About the Fed, Bartlett states “It’s inaccurate to suggest the Federal Reserve acted in a political manner during the economic crisis.” “They’ve acted in a transparent way and fulfilled their statutory responsibilities.” This could not have been said with a straight face knowing that the Fed handed out taxpayer backed loans under the cover of darkness during the crisis.
Ending the article, Bartlett states “I don’t think it (the Fed) has legs as a campaign issue,” “It’s only an issue if it has legs with the voters, not with the candidates.”
He may be right that the issue may not have legs with voters, which is sad. The point that the mainstream media seems to habitually miss is that the issue of the Fed is not a Democrat or Republican issue, but something much more. The misguided policies of the Fed affect more than just voters, campaigns, and financial institutions. They affect every poor soul that has a dollar in his or her pocket.
Every dollar that the Fed prints and sends to favored parties makes all of our dollars worth less and less, and the more money that is used to prop up poor decisions by banks, the longer this Great Recession will last. How it became popular for Republicans to criticize the Fed is beyond my comprehension, but in my opinion, the more anti-Fed sentiment that is spread to the masses the better. As Henry David Thoreau once wrote “It takes two to speak the truth – one to speak and the other to hear.”