Or, so says the WaPo in their latest propaganda piece ...
The House of Representative's reform package hurts the Fed's independence
The case for political independence at the Fed is elementary ... Investors already spend enough energy and money trying to figure out where interest rates are heading without this additional dose of permanent uncertainty. Trust in the Fed, and, by extension, the dollar, will evaporate if markets believe that the Fed is courting the approval of Congress's auditors.
So they start with a gross distortion of the bill. What's next?
Mr. Paul doesn't care; he's an "end the Fed" man. In the past, other members of Congress have basically just humored him. It's a sign of the times -- and not a good one -- that they have been Fed-bashed into following him now. To be sure, the Fed may have ... contributed to the current crisis -- during which the Fed has ventured into new and unorthodox areas ...
See? It's not good to question the omnipotence of the central (planner) bank. Even though they helped create the financial crisis, we are not to "bash" our Washington Overlords. Understand?
Mr. Paul's cure is worse than the Fed's ills, real or alleged ... We hope cooler heads prevail in the Senate, though a similar measure has 31 co-sponsors there. If not, Mr. Obama will have to get out his veto pen.
Luckily, "cooler heads" do prevail ... There is no such thing as Fed "independence."
The Fed’s “Independence” Argument Is False
Indeed, the whole idea of independence means that the Fed should be shielded from political pressure to artificially pump up the economy with easy money right before elections. Congress never intended Fed “independence” to mean independence from Congressional oversight to ensure that the Fed is acting within its mandate and in the best interests of the country. These are two totally different concepts, and the Fed and its boosters are being disingenuous when they argue that an audit will interfere with independence from pressure to pump up the economy right before elections.
Whatever can be said for the Fed in the past, picking winners and losers is “not the proper role for the central bank”, in Volcker’s words. Without an audit, we will never know which “winners” were saved and which “losers” were left to die, or why. Nor do we really currently know which bailouts and other actions were truly performed under emergency conditions – to stave off catastrophe – and which were done to help out financial companies for other reasons.
Moreover, Bernanke gave many billions to private foreign banks and foreign central banks (and see this). Has the Fed been picking winners and losers among countries? Among private banks?
Woods: Deference to the Fed is "Superstitious Reverence"
The Fed’s arguments against the bill are unlikely to persuade, and will undoubtedly strike the average American as little more than special pleading. Perhaps the most frequent of the claims is that a genuine audit would jeopardize the alleged independence of the Fed. Congress could come to influence or even dictate monetary policy.
This is a red herring. The bill is not designed to empower politicians to increase the money supply, choose interest-rate targets, or adopt any of the rest of the Fed’s central planning apparatus, all of which is better left to the free market than to the Fed or Congress. It seeks nothing more than to open the Fed’s books to public scrutiny. Congress has a moral and legal obligation to oversee institutions it brings into existence. The convoluted scenarios by which merely opening the books will lead to an inflationary catastrophe at the hands of Congress are difficult to take seriously.
At the same time, as we hear this objection repeated time and again, we might wonder just how independent the Fed really is, what with its chairman up for reappointment by the president every four years. Have these critics never heard of the political business cycle? Fed chairmen have been known to ingratiate themselves into the president’s favor close to election time by means of loose monetary policy and the false (and temporary) prosperity it brings about. Let us not insult Americans’ intelligence by pretending this phenomenon does not exist...
The Myth of the “Independent” Fed
Ever since its founding in 1913, the Fed has described itself as an independent agency operated by selfless public servants striving to fine-tune the economy through monetary policy. In reality, however, a non- political governmental institution is as likely as a barking cat. Yet, the myth of an independent Fed persists. One reason this myth persists is that statist textbooks have helped perpetuate it for decades.
When the Fed was founded, it was controlled by two groups, the Governors’ Conference, composed of the twelve regional bank presidents, and the seven-member Federal Reserve Board in Washington. In 1935 the Fed was reorganized to concentrate nearly all power in Washington. Franklin Roosevelt packed the Fed just as he later filled the U.S. Supreme Court with political sycophants. Roosevelt appointed Marriner Eccles, a strong supporter of deficit spending and inflationary finance, as Fed Chairman, although Eccles had no financial background and lacked even an undergraduate degree. In those years the Fed was really run by Eccles’s political mentor, Treasury Secretary Henry Morgenthau, Jr., and thus ultimately Roosevelt.
Later presidents were no less willing to influence supposedly independent Fed policy. According to the late Robert Weintraub, the Federal Reserve fundamentally shifted its monetary policy course in 1953, 1961, 1969, 1974, and 1977-all years in which the presidency changed. Fed policy almost always changes to accommodate varying presidential preferences.1
For example, President Eisenhower wanted slower money growth. The money supply grew by 1.73 percent during his administration-the slowest rate in a decade. President Kennedy desired somewhat faster money creation. From January 1961 to November 1963, the basic money supply grew by 2.31 percent. Lyndon Johnson required rapid money creation to finance his expansion of the welfare/warfare state. Money-supply growth more than doubled to 5 percent. These varying rates of monetary growth all occurred under the same Fed chairman, William McChesney Martin, who obviously was more interested in pleasing his political master than in implementing an independent monetary policy.
Martin’s successor, Arthur Burns, was such a staunch supporter of Richard Nixon that he lost all professional credibility by enthusiastically endorsing Nixon’s disastrous wage and price controls.
Any government monopoly will be corrupt and inefficient, but the Fed may be the worst government monopoly of all. Not only does it operate for its own advantage in the name of promoting the public interest, and offer government officials political cover for their self-interested policies, the Fed also allows no escape. One can at least refuse to do business with, say, the government school monopoly by homeschooling or by sending one’s children to private schools. But one cannot avoid the effects of the Fed’s monetary monopoly. It is time to depoliticize and denationalize our money.
Don't listen to the cheerleaders of Grand Central Planners and the Economic Wizards of Oz. They are but liars and fools.
