Federal Reserve Loses Expanded Powers Proposed By Obama Administration

The pushback against an omnipotent Federal Reserve keeps growing.

A top Congressional leader said Thursday that the Fed will not have the power to override other federal regulators when it comes to policing firms whose size or activities pose a threat to the entire financial system. This is a sharp break from the proposal first put forward by the Obama administration.

In the Obama proposal, which was released in the House last week in the form of a draft bill, the Federal Reserve would have the authority to ignore the recommendations by a firm's primary regulator (be it a bank or securities regulator) and simply impose its own standards on the firm. The Fed would also have the power to examine the firm, and force the firm to comply with those standards if necessary.

In essence, if the other regulators didn't play ball the Fed's way, the Fed could shove them aside.

Not only did the affected agencies complain, but members of Congress did, too.

Comptroller of the Currency John Dugan, who heads the agency overseeing national banks, expressed reservations about the proposal last week, saying that the approach "has the twin risks of producing less effective standards and undermining the effectiveness of the primary banking supervisors."

Sheila Bair, chairwoman of the Federal Deposit Insurance Corporation, told the Washington, D.C. newspaper The Hill that, "You really can't be a check on the Fed if the Fed has the power to enforce whatever the council decides."

So on Thursday, House Financial Services Committee Chairman Barney Frank (D-Mass.) said he was changing that provision.

"There will not be a Federal Reserve power to overrule other entities," he said.

It seems to be another sign that dissatisfaction with the Fed as a regulator is starting to impact how legislators and policymakers attempt to fix what is largely seen as a broken and fractured regulatory regime.

Comments

[UNCLEJOE]

THE FED IS UNCONSTITUTIONAL
A Class Action suit should be organized to challenge the Constitutional legitimacy of The Federal Reserve Central Bank.

On December 24, 1913, when the Federal Reserve Act was voted on, there was not the necessary quorum present for a valid vote to grant the Fed their Charter to control the US monetary System.; that makes the Fed Unconstitutional from the very beginning.

Whether the Class Action Suit reaches the Supreme Court or not, the case will get national attention and the Fed's dirty linen will become public knowledge with or without the Audit that Ron Paul is sponsoring.

[FreedomCorpse]

Are we on the Road to RootA yet?

[ssg13565]

For all those who are so sure they know that the FED alone has the power to create money, I ask you to consider some of the following:

Do you know of any other entity that can legally issue false money and cause inflation and deflation whenever they feel it suits them?

You do remember the dot com bubble, don't you? Were any of those companies actually worth what their stock prices seemed to be saying they were worth? Did it make sense that because of inflated stock prices AOL could buy Time-Warner? Where did all the money go when the bubble burst?

When a bank takes in your deposit and then loans it to someone, saying that you have that money in your account and the borrower also has that money, did someone just create some money?

If you don't understand these things, then you do not understand enough real economics to make any judgments about the FED. If you do understand this, then you know that the FED does not have absolute control over the money supply.

[joebhed]

Excuse me for what I do not know.
I learn something new every day, I hope.
Did somebody SAY that only the Fed and its member banks have the authority to create money?
Cause I didn't hear it.

Somebody SHOULD have absolute control over the money supply, and I do not think it should be the Fed. My suggestion is the people of the US, acting through their Congress, the federal monetary authority and the Treasury.
Who do you think?

When you use the term money supply, does that include like the M-3?
Because the funny thing is that the non-commercial, so-called shadow banking sector was responsible for the MAJORITY of the growth of the money supply over the past fifteen years or so.
So, that's the answer to your first question - the IBs.
Who is regulating that sector that created most of the money?
Oh, I forgot, they are self-regulated.

This self-regulation was demanded by the investment bankers, and fully supported over that period by the primary monetary policy authorites known as Alan Greenspan, Ben Bernanke, Robert Rubin, Henry Paulson and Tim Geithner, and a few lesser minions.

PS - banks do NOT take your deposit and lend it to ANYONE.
Banks create NEW money with all new loans.

Go to economicstability dot org.
Check out the monetary literacy course.

[Patriot86]

Banks do not create new money with loans...they merely move money around and pay out profits to themselves...banks do not create wealth.

[billw8017]

Patriot is wrong. The banks do create money with their loans, much of which "remains" in their vaults to be drawn upon. This is what their "leverage" is all about. The quantity of money that the banks can create is only limited by the proportion that they must hold as ready assets, which has been as little as 5%: meaning that bank money can be as much as 20 times hard cold cash.

This is also why the inflation lags by three to four years when the government arbitrarily prints money. Our economy has been in pain for several years now. The books are cooked according to various experts including Kevin Phillips and Walter Williams and conceal some of the pain. So, this year there was "no inflation" despite our experience of rising prices.

The prices of fuel and food, actually basic stuff, were said to be too volatile to matter, but now down, are said to be the whole story.

[joebhed]

Excuse me for what I do not know.
I learn something new every day, I hope.
Did somebody SAY that only the Fed and its member banks have the authority to create money?
Cause I didn't hear it.

Somebody SHOULD have absolute control over the money supply, and I do not think it should be the Fed. My suggestion is the people of the US, acting through their Congress, the federal monetary authority and the Treasury.
Who do you think?

When you use the term money supply, does that include like the M-3?
Because the funny thing is that the non-commercial, so-called shadow banking sector was responsible for the MAJORITY of the growth of the money supply over the past fifteen years or so.
So, that's the answer to your first question - the IBs.
Who is regulating that sector that created most of the money?
Oh, I forgot, they are self-regulated.

This self-regulation was demanded by the investment bankers, and fully supported over that period by the primary monetary policy authorities known as Alan Greenspan, Ben Bernanke, Robert Rubin, Henry Paulson and Tim Geithner, and a few lesser minions.

PS - banks do NOT take your deposit and lend it to ANYONE.
Banks create NEW money with all new loans.

Go to economicstability dott org.
Check out the monetary literacy course.

[blimie]

If this is true thank God. Their evil scheming was foiled for now.

[ReedYoung]

Ha! I can hardly believe it! Good news about financial regulatory reform?! Amazing!

[Mafdet]

I gotta say, I have seen nothing of the Federal Reserve Board's performance to suggest that it should be the vested with this kind of authority.

Wouldn't it make more sense to criminally prosecute the executives of public financial firms who behave recklessly.

Let's just review: Executives at our biggest financial firms created an investment offering by clumping all kinds of loans - high risk, low risk, imaginary (34 dead people in South Dakota were given home mortgages because the need to create and bundle more was so exaggerated) - and then they developed a derivative scale that would allow them to assign a AAAA credit rating to these "asset backed securities", then they sold them all over the world. And now they can't say what loans belong to what tranches or if they're real.

Sounds like fraud to me. I betcha that wouldn't happen again if the executives who engineered it were sent to prison for a while. I betcha that would be a lot better deterrent than knowing that the Fed is watching the store.

[DustinTime]

Thank God, for they are an unconstitutional, democracy-choking criminal enterprise...

[codycap]

Wpmiller on another thread explained it this way.

There is no need for the federal government to run at a deficit! Simply take back the money creation powers from the private banking system and make them again part of the federal government. (Despite its disingenuous name, the Federal Reserve is not "federal" - it's a private, for-profit company.)

Currently, we've ceded money-making to a private corporation, that we then have to "borrow" from, and pay interest to it.

It's like me checking out all the public library's books, and then renting them back to the library. How crazy is that?! Money should be a public utility like roads, utilities, police, and fire response.

[joebhed]

Check out Milton Friedman's : Fiscal and Monetary Framework for Economic Stability.
Also his book: A Program for Monetary Stability.
He agrees with you and wpmiller.

Check out the Chicago Plan for Monetary Reform - the plan put forward by the most noted economists of the early '30s in a proposal to FDR that was discussed as proposed legislation during '33. They ALL agree with you and wpmiller.

Check out the American Monetary Institute at monetary.org and see their proposal to change the system we now have to the one you describe.
They all agree with you and with wpmiller.

Check out the best one - economicst­ability.or­g and view the monetary literacy course, cause we all agree with you and wpmiller as well.

The Money System Common.
Economic democracy through monetary reform.
If the people lead, the leaders will follow.

[codycap]

Thanks

It sounded crazy when I first heard it but the more I learned--whew

Now I am going to find out the reasons this come about.

Its a whole new kettle of worms to me.

[Patriot86]

Friedman and his economic fairy tales are why we are in the mess we are in today. In 2008, one saw the results of such policies. Only those blinded by ideology would even consider these policies.

[Pamzy]

I feel up, I feel down.
Bad news... The O administration wanted to keep the status quo
Good news... Wiser, cooler heads prevailed.
It was the best of times
It was the worst of times

[codycap]

This is a Public Service message from your elected Representatives

"The beatings will continue until morale improves."

[greginwva]

Like everyone else, I dont understand the Fed ,but if we celebrate congress turning its back on the President here, lets not blame him for not being able to twist arms on say, healthcare reform. We cant have it both ways.

[Osusuki]

Non sequitur, fella. The key is for the things which will fix our problems to be backed by both sides. The Blue Cross Dog Democrats in congress need to be stepped on by the President over health care, but the President needs for someone to give a big WTF about his unquestioning trust of financial advisers who were born and raised in the very corporations being regulated, and some of whom were willing parties to the repeal of Glass-Steagall in the first place.

The Fed is NOT a national bank; it's a private institution just like any other bunch of money grubbing corporate criminals. The power to regulate NEEDS to be shifted away from the rabbits guarding our lettuce and toward real government regulators. Otherwise, we're going to be stuck with this "What's good for Wall Street is good for America, so we'll get to job creation later" BS for the rest of our lives.

[marsha1951]

This is a lengthy, yet full of information movie, Zeitgeist the Movie. http://www.zeitgeistmovie.com/

[mergina]

Obama and Geitner and so much of the corrupt horror story that is Washington politics have all sold out to THEIR MASTERS...yes MASTERS. They all have a MASTER right up to and including his royal highness OBAMA. Just smile for the cameras and say 'YES MASTER.'

[leftcoastliberal]

The "masters" are the corporate titans of Wall Street, the politicians – including Obama – are their servants.

Fortunately, the masters are only in absolute agreement on one subject, they're pro-plutocracy.

On other issues – abortion, gay rights, the wars, health care reform, market regulation – they represent a broad spectrum of opinion and are forced to appeal to the general public for support.

[fijisailor]

Obama is a good man who could do good things for our country if allowed. I believe he is roughly equivalent to the Queen of England and has very limited powers, especially when it comes to economic powers. I just don't want to believe that it was his idea to give the FED more power.

[AmazingChicken]

Wow, me either. Wouldn't want Timmy to be able to help his friends ALL the time.

[ContraEgoiste]

ummmm sorry, as someone who campaigned, worked the phones and voted for Obama, his selections and appointment of people to oversee and run the economy (Geithner, Summers, etc) and his reliance on DLC-ers is causing me much doubt about his intentions.

I'm trying to reserve much judgment until at least half his term but I'm keeping my eyes open.

[jaschrod]

Barney Frank is one of the best fighters we have for fairness for the people. He is one of the few who has the guts to ask legitimate questions about actions being taken by our so called leaders.

[Lorianne]

It's Ron Paul who introduced the bill. Frank is the one 'uncomfortable' with it.

Did the Testimony of Tom Woods Come Too Close to Home for Barney Frank?
http://www.economicpolicyjournal.com/2009/09/did-testimony-of-tom-woods-come-too.html

Why Tom Woods Set Off Mel Watt's Voltage
http://www.economicpolicyjournal.com/2009/09/why-tom-woods-set-off-mel-watts-voltage.html

[Oldbuck]

Its pretty obvious that the present system is not working very well and don't think it will every be repaired with that some intervention by the Federal Reserve. Our financial system has become a wreck because of the policies of the last 16 years. I not sure how this should be fixed just sure it needs repair

[joebhed]

Our financial system has become a wreck because of the policieis of the last hundred years, or ever since we have had the Fed and legalized the crime of banking, as we know it.
Google Silas Adams' book by that name - the Legalized Crime of Banking.

Check out the American Monetary Institute's excellent proposal for reform, which will soon be introduced by Cong. Dennis Kucinich.

Check out the monetary literacy course and primer at economicst­ability.or­g .

We DO have the means to change this system.
What we need is the political will to make it happen.

The Money System Common.

[Confused1]

Who was the "star bright" that even suggested the Fed be given he power to override the regulators? The Fed won't even tell Congress where all the bailout money went. Why would anyone want to give them yet more power with no oversight?

Whoever suggested this needs to be fired.

[texaz3step]

Treasury Secretary Timothy Geithner ...

[hellboundtrain]

The Fed is just more greedy bankers having a bad effect.

Read how the Fed Act came into being in 1913. It was a devious trick!