The Federal Reserve Board has provided the basis for thousands of conspiracy theories in its near-100-year existence. These conspiracies have some basis in reality as can be seen by the Fed's recent moves on monetary policy. In the last two meetings of the Fed's Open Market Committee (FOMC), the Fed's key decision-making body, the members appointed through the political process unanimously supported stronger measures to spur growth and create jobs. By contrast, three of the five voting members appointed by the banking industry opposed further action.
This extraordinary split has not received the attention it deserves. It suggests that the financial industry is using its power at the Fed to try to block the course preferred by the appointees of democratically elected officials of both parties.
The Fed is an enormously important if poorly understood institution. Its control of monetary policy (primarily short-term interest rates) gives it the ability to speed up or slow growth. It also has enormous regulatory power. Alan Greenspan could have used this authority to put a check on the junk loans that fueled the housing bubble in the years 2002-2006.
If the Fed wants to ensure that the economy does not grow too rapidly it can slow growth by pushing up interest rates. This was the cause of all the post-war recessions prior to the last two as the Fed raised interest rates in order to reduce growth and employment and thereby slow inflation.
The Fed can also boost growth by lowering interest rates. To counteract the current recession, the Fed lowered its short-term rate to zero. Since this is as low as interest rates can go -- the Fed can't have negative interest rates -- the Fed has tried to reduce long-term interest rates by measures such as the quantitative easing policies adopted in 2009 and 2010 and more recently the purchase of long-term bonds through "Operation Twist."
This is where the issues of control come in. The FOMC has 19 members. Seven of these members are governors of the Federal Reserve Board. These governors are appointed by the president and approved by Congress. They serve a 14-year term. The extraordinary length is intended to ensure their independence. They can use their best judgment without worrying that the current president or Congress will take away their job.
However, the other 12 members of the FOMC are not appointed by democratically elected officials. They are the 12 regional bank presidents. While the process of selecting the regional bank presidents is somewhat complicated, it is largely controlled by the banks within a region. This means that 12 of the 19 members of the FOMC are selected by the banks. At any point in time, only 5 of the 12 bank presidents have a vote. This gives the governors a 7-5 majority among the voting members, even though they are outnumbered 12-7 on the FOMC as a whole.
Most of the time decisions by the FOMC are unanimous. The FOMC typically discusses the current economic situation for 2-3 hours and considers possible actions. By the time a vote is called everyone has expressed their opinion so the outcome is already known. In the interest in showing support for the Fed, most members agree to support the majority decision to make it unanimous. Occasionally, one member will make a point of dissenting to show that he or she felt strongly about the issue being considered.
The last two meetings of the FOMC were extraordinary in that they featured not one, but three dissents. Furthermore, it was striking that all three dissents came from the bank presidents who were appointed by the banking industry.
The immediate issue at hand is whether the Fed should be trying to do more to boost growth and create jobs. The five governors (there are two vacancies) appointed through the democratic process all felt that it was important to do more to generate jobs. This was a bipartisan sentiment. Three of these members were appointed by President Obama, one was appointed by President Bush, and one (Chairman Bernanke) was appointed by both.
However of the five people appointed by the banking industry, three voted against stronger measures. The likely explanation is that bankers don't care much about unemployment. After all, they have jobs, as do most of their friends. On the other hand, inflation is really bad news for banks. It directly reduces the value of their assets.
This means that when the Fed debates a policy that risks somewhat higher inflation in order to reduce unemployment, the bankers' answer is to screw the unemployed. The outrageous part of this story is that the bankers don't have to push their agenda as an outside interest group; they actually have seats directly given to them on the FOMC.
This would be like letting Pfizer or Merck pick two of the five commissioners for the Food and Drug Administration or letting Comcast and Disney pick members of the Federal Communications Commission. All regulatory agencies are susceptible to inappropriate influence by the affected industry groups, but in the case of the Fed, the country's most important regulatory body, the industry group is already on the inside.
An overhaul of the Fed is long overdue. It should be turned into a body that directly answers to Congress just like every other regulatory agency. And the bankers must go. This would be a great way to mark the Fed's 100th anniversary in 2013. We can make it an institution that is consistent with democracy.
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There is no reason to believe that the majority opinion is the best opinion.
When non experts are placed in charge of regulating a system, it's probable they will make the wrong decision because they do not know anything about the system.
When my car breaks, I don't want the majority opinion of 10 people on the street deciding how to fix it.
I want a mechanic that works on cars everyday.
The Fed needs experts in banking making banking decisions.
the incredibly low interest rates (essentially zero) are effectively a subsidy for the TBTF institutions, a nice way to put corporate welfare
There was a reason most of the founders abhored the idea of a central bak - that it concentrated too much power in the hands of unelected and therefore unaccoutnable to the people institution
"It suggests that the financial industry is using its power at the Fed to try to block the course preferred by the appointees of democratically elected officials of both parties." - I would say it more tyhan suggests it, this proves it!
1. take away all bank regulation from the Fed - it's a huge conflict of interest
2. limit Fed monetary activities to short term interest rates only. They are going too far micro-managing the economy by manipulating long term rates and buying mortgage bonds
I could go on with other issues but this would be a good starting point.
Jobs - we all want jobs. What difference in our political outlook, our religion or our color would separate our desire to have jobs that pay a living wage ?
Democracy - we all want a fair governing system - so why keep the bankers in charge ?
Representation - we want our voice to matter, we want our vote to count. So why allow loop holes in campaign finance ? Why let corporations rule the election by spending millions on candidates because they want to own them and own their vote.
These are universal nonpartisan issues.
Republicans only represent the 1%
Your not in the 1%
Your in the other 99% wake up !!
You cannot get these three vital issues resolved by voting republican, it will never happen. Romney doesnt give a damn about the 99% he said publicly unashamed "corporations are people". He's part of the 1%. The people who want him to win are in the 1%.
Rick Perry is a lobbyists dream. And he wants to teach "Creationism" in grammar school science class AS A SCIENCE !! He's crazy. He completely ignores Separation of Church and State. You think he's going to care about the 99% ? NO.
OWS should adopt this as their #1 priority followed by Campaign Finance Laws and overturning Citizens United vs Fed Elec Comm and Buckley vs Valero.
It's not too late to take back your country but if we take back just one portion of it, the power of The People will swell and we'll be able to take back most of it.
I fear the energy debate has been lost. We waited too long and now its too late. Our stock market is too dependent on the strength of oil currency worldwide. If we abandoned oil as energy today the middle east, Russia and China, Indonesia and Africa would erupt into a continental war and drag us into it. If we share this new found imaginary energy source the middle east would erupt into war for real estate knowing their only marketable product was worthless.
Capitalism is failing. We need to rethink our socioeconomic future as a planet. Capitalism only works for the rich. If the poor decided they nolonger wanted to work for slave wages they could just overthrow their masters. Of course this would require sacrifice and Americans are fast becoming drooling cattle a far cry from spartan warriors for freedom.
The rich make the laws
The poor are restricted by the laws so that the rich can keep getting rich safely
The poor outnumber the rich 99:1
Do the math
Employment Act of 1946
1970 amendments to the Bank Holding Company Act
International Banking Act of 1978
Full Employment & Balanced Growth Act of 1978 the
Depository Institutions Deregulation & Monetary Control Act of 1980
Financial Institutions Reform, Recovery, & Enforcement Act of 1989
Federal Deposit Insurance Corporation Improvement Act of 1991.
The Employment Act of 1946 & (especially) the Full Employment and Balanced Growth Act of 1978 sought to clarify the role of employment:
"A central economic goal of the Congress, as indicated by the title "Full Employment and Balanced Growth Act,'' was and is the achievement of full employment."
http://fraser.stlouisfed.org/publications/erp/page/5710/download/46325/5710_ERP.pdf
It's a mistake to hypothesize that an individual or any group of people are immune from greed. To expect to eradicate greed from human nature is unrealistic. One can easily imagine individuals/groups of people acting more greedy in one situation & more reasonable in another set of circumstances. I think it makes more sense to attempt to minimize the damage or collateral damage of greed.
Personally, I think the more frequent dissenters are a good sign. Denying the necessity of adapting systems relative to changes in conditions is like insisting the Emperor is wearing new clothes. Ideology often acts like a blind spot when it comes to reality.
Talk to Kucinich about how the Federal Reserve should lose it's ability to create money, since that is the congress job constitutionally.
We need to issue green backs while phasing out fractional reserve at the same time to eliminate inflation.
Do the banks control money or does the republic. Rule by the rich or rule by democracy. Choose.
“The Government should create, issue, and circulate all the currency and credits needed to satisfy the spending power of the Government and the buying power of consumers. By the adoption of these principles, the taxpayers will be saved immense sums of interest. Money will cease to be master and become the servant of humanity.” Abraham Lincoln
The Banksters Robbed us of trillions. The federal Reserve has given them , at .004%, about 16 trillion more. Arrest the Banksters for the Fraud: SWAPS and CDO's. Federal reserve system. Watch "the Money Masters"
http://www.themoneymasters.com/
http://webskeptic.wikidot.com/money-masters-transcripts-part-24
Bankster now literally own us.
http://en.wikipedia.org/wiki/File:Estimated_ownership_of_treasury_securities_by_year.gif
I'd also add a restriction that NO person who is currently employed by a bank or has a stake in a bank in ANY way can work for the FOMC or regional federal reserve bank for 10 years after their employment.
The Fed is ENORMOUSLY important
...to banks.
To the rest of America?...not so much.