Even the Fed may face stress tests
Some unlikely political allies are pushing a piece of legislation that calls for a full-scale audit of the Federal Reserve and its 12 regional banks. Steve Henn reports what would be involved in a stress test for the Fed.
The Federal Reserve Building in Washington, D.C. (Mark Wilson/Getty Images)
More on Investing, America's Financial Crisis
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.
Comments
Comment | Refresh
From los angeles, CA, 05/19/2009
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
From los angeles, CA, 05/19/2009
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
From Canutillo, TX, 05/18/2009
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.
From Phoenix, AZ, 05/17/2009
Thank you, Mr. Ryssdal, for covering HR 1207. Please continue to bring more stories about the Fed to Marketplace and NPR.
From Sante Fe, NM, 05/17/2009
HR 1207 is one of the most important bills to come along in quite some time. I am glad Ron Paul is the originator. I respect him greatly.
From Colorado, CO, 05/17/2009
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.
From Andover, MN, 05/17/2009
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.
From West Hollywood, CA, 05/17/2009
"..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.
From TX, 05/17/2009
I have always considered NPR to be a government run government slanted media outlet. Thank you for running a piece about how our large government has failed us.
From ann arbor, MI, 05/16/2009
Thank you NPR for covering this. More stories like this will get me listening to Marketplace again, because this info gets to the heart of the matter, rather than being a mere distraction.
From VA, 05/16/2009
About time NPR wakes up to this issue. It's time to not just audit the Fed, but SHUT IT DOWN, and this is the first step. Tell them we're tired of paying their inflation tax to prop up banks and government overspending!
There is NO good reason that we had to lose 95% of the value of the dollar, and it's about time the sheep woke up and realized it. Constant inflation is not normal OR good, and centralized economic policies such as central banking have historically ALWAYS been a failure.
05/16/2009
Still, NPR managed to throw in an objection to auditing the Fed (maintain their "independence"). What a joke. And I loved the way Bernie Sanders was introduced as a scary socialist, in an effort discredit the bill, I assume.
From Truckee, CA, 05/15/2009
Great story NPR. The FED is the true cause of our current economic situation. The artifically low interest rates set by the FED after 9/11 created the housing bubble. Cheap money led to a misallocation of resources. Now that the bubble has burst the FED is trying to fix the problem with the same tactics. Its time to shed some light on the FED and its monetary policies.
From CA, 05/15/2009
I'm glad that NPR is covering HR1207.
From IL, 05/15/2009
I think the most important part does not lie with congress or the media. (I am grateful for NPR sticking out their neck), but the power lies with the people just as the responsibility to act and not let power grabing people steal the rights from the common citizen.
From anaheim, CA, 05/15/2009
..."like it's going out of style", interesting choice of words!
The fed banks have destroyed the dollar and stolen all of our money AND they think they can get away with it. As long as they own the media and our congress, we're screwed. Americans, in general, aren't inquisitive enough to find out what is really happening to them.
The truth is ugly folks, prepare yourselves!
From Manchester, NH, 05/15/2009
A big thank you to NPR for covering this story, but I honestly think that this organization (NPR) should really be doing more to get this information out to the public. The Fed and it's its destructive manipulation of money and credit and undermining this country very quickly, and it's public sources of news like the internet and NPR that are going to have success in getting the truth out to the people. Hopefully we'll see more stories like this in the future as support for H.R. 1207 grows. I encourage you all to visit http://www.campaignforliberty.org to learn more about these issues and to learn how to encourage your local representatives to get on board with H.R. 1207.
From PA, 05/15/2009
162 co-sponsors and counting. this 4th branch of government is completely free from public scrutiny and it is time to end. the fed has operated with autonomy since 1913 and failed miserably at its stated purpose of preserving the value of the dollar/price stabilization. It is estimated the dollar has lost 90%+ of its purchasing power since the fed gained monopoly control of printing dollars.
From Charlottesville, VA, 05/15/2009
Thank you NPR for covering this story! There does need to be an Audit of the Fed. Please have more pieces like this one.
From Greensboro, NC, 05/15/2009
What defenses are there for NOT auditing the Fed?
... There isn't one. If you skim the US Constitution, it clearly states it is up to Congress to spawn money--Not some fourth branch of unknown government.
Post a Comment: Please be civil, brief and relevant.
Email addresses are never displayed, but they are required to confirm your comments. All comments are moderated. Marketplace reserves the right to edit any comments on this site and to read them on the air if they are extra-interesting. Please read the Comment Guidelines before posting.
You must be 13 or over to submit information to American Public Media. The information entered into this form will not be used to send unsolicited email and will not be sold to a third party. For more information see Terms and Conditions and Privacy Policy.