Thursday, June 18, 2009
Monetary Pyromania Soon to Flourish under the Hot Summer Sun?
Late Friday afternoon greetings to all, Did anyone catch the misleading analogy Geithner used to describe the upcoming regulations and Federal Reserve powers? He used the words "Fire Department". We have this short message for Geithner: . The financial fire we're in the process of extinguishing was ignited by loose monetary policy/cheap money, so are we now entrusting the firetrucks and water hoses to the same pyromaniacs? Since they were accomplices to the financial fires, why would they now be promoted to guard over the private sector, a sector that has evolved over time and should be allowed to bankrupt itself over time~ What is it about capitalism and free-markets that Geithner fails to understand? . The time element of allowing the private sector to heal itself is what most government officials are missing here. If there was crime, let's prosecute, but let's not shower more power to the Fed. Creating bigger bureaucracies as a result of a crisis does nothing to promote organic private sector growth and a return to true free-market capitalism. . The recent proposal of empowering the Fed is eloquent nonsense on the part of Geithner, Obama, and Lawrence Summers, who in our opinion is setting up to be the next Monetary Fire Starter and Captain of the Almighty Fed. The Psychology of the Call team wishes all a good Thursday afternoon (POTC). http://psychologyofthecall.blogspot.com/ ------------------------------------------------------------------------------------------------- WASHINGTON (Dow Jones)--Treasury Secretary Timothy Geithner faced the questions on Capitol Hill Thursday but it was the Federal Reserve that had lawmakers' attention as they expressed concern about vesting more authority with the central bank. Geithner, appearing in rare back-to-back hearings on both sides of Congress, was repeatedly pressed on the regulatory overhaul unveiled Wednesday by President Barack Obama and the Treasury Department. He said policymakers "cannot afford inaction," and must overhaul regulation of financial firms, protections for consumers and oversight over financial markets broadly. But in the first formal airing of concerns with the Obama plan, lawmakers focused on the linch-pin of the proposal: giving the Fed broad authority to regulate systemic risk and examine any firm that could threaten financial stability. "I personally believe this represents a grossly inflated view of the Fed's expertise," Sen. Richard Shelby, R-Ala., said during Geithner's morning appearance before the Senate Banking Committee. Sen. Jim Bunning, R-Ky., a long-time Fed critic, pointed out that the Fed has declined to use its authority when it was given powers by Congress, most notably with writing mortgage regulations passed by Congress in 1994. "It took 14 years for the Fed to write one regulation on mortgages that we gave them," Bunning said. "What makes you think the Fed will do better this time around?" In addition to a lack of faith in a more powerful Fed on the part of some lawmakers, they were also wary of impinging on the central bank's core mission to set monetary policy. A requirement in the Obama plan that the Fed seek Treasury approval to use emergency lending powers, is troubling, lawmakers said. "I think that's really crossing a line and a sort of fundamental change," Sen. David Vitter, R-La., said. "All of a sudden, the Fed is acting more like a department of the government than an independent bank." Geithner, fielding the criticism from both sides of the aisle, said the Fed is best suited among existing agencies to be the chief cop overseeing the financial system as a whole. "It has a greater knowledge and feel for broader market developments than is true for any other entity," he said. He also downplayed the idea that the plan would consolidate too much power at the central bank, calling any expansion "actually quite modest" and saying that the Obama administration doesn't want to overextend the Fed. The Fed's ability to act independently will not be removed, he vowed. "It is very important that we preserve the independence of the Fed and its basic credibility and responsibility for monetary policy. We would not recommend a proposal that would put that at risk," Geithner said. -By Michael R. Crittenden and Maya Jackson Randall, Dow Jones Newswires; 202-862-9273; firstname.lastname@example.org Click here to go to Dow Jones NewsPlus, a web front page of today's most important business and market news, analysis and commentary: http://www.djnewsplus.com/access/al?rnd=yIF5BrRVMpn0wKi%2B5qWcEA%3D%3D. You can use this link on the day this article is published and the following day. (END) Dow Jones Newswires June 18, 2009 12:22 ET (16:22 GMT) Copyright (c) 2009 Dow Jones & Company, Inc.- - 12 22 PM EDT 06-18-09
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