Why the Fed is Getting More Power Under Regulatory Reform
The Fed's power will increase under the newly passed financial regulatory reform bill. While we won't know the exact measures to be implemented to "reform" Wall Street and the banking industry, we do know the Fed managed to not only defend it's regulatory power, but increase it.
I'm not sure this is a wise move. But we can debate that. What you have to wonder about, however, are these comments by Janet Yellen, Fed Governor in San Francisco. During a Congressional hearing held to approve her nomination as Fed vice chairman, she made some curious comments. For example:
"We failed completely to understand the complexity of what the impact of the national decline in housing prices would be in the financial system."
Failed completely? Yeah, you'd have to say. And it's not like no one else saw big problems looming from a housing bubble.
In fact, while the bubble grew to gigantic proportions the Fed kept denying there was a bubble. Then, when things started falling apart, they claimed it wasn't a "national" bubble, just some local and regional bubbles.
I don't even remember them admitting how badly they really recognized the extent of the housing collapse until it was obvious to everyone. Then, when it was, you mean to say they didn't understand the impact of the decline? How is that possible?
The whole sub-prime crisis that broke in 2007 was based on housing prices declining. Of course, Fed Chairman Bernanke said it wasn't a big deal at the time. And why did he say that? Beats me. Unless the Fed and its Chairman had no ideal what the heck the investment banks were up to with the sub-prime debt bubble they created.
But wasn't the Fed supposed to know that? Weren't they regulating banks?
Ms. Yellen did go on to say this:
"We saw a number of things and we failed to connect the dots."
Ah, that's better. So you did see "things." You just didn't figure out what they all meant.
Now if I were to say that I see things going on in the stock market, but I just can't figure out what they all mean, would you want me to give you investment advice? No, I suppose not.
But the Fed, in its role as a regulatory agency - which couldn't manage regulating things before - will be given even more power now. The same Fed which eventually, finally saw things going on in the economy and with the institutions they already regulated, but couldn't figure out what it all meant will now oversee even more of the economy and even more institutions.
Reassuring, isn't it?
Now, I don't know Ms. Yellen. I've read her speeches from time to time, but I really don't know her. I was, however, taken aback by this testimony, especially since she gave it while the Fed was trying to increase its regulatory oversight.
Then again, I'm sure most people paid no attention to her remarks. After all, she'll be nominated as Vice Chairman of the Fed, a promotion from her current job as Fed Governor. And the Fed will get more power.
You can't believe anyone really heard what she said in her testimony, can you? Of if they did, maybe they just did "focus" on what she said. Or maybe it's just that they probably didn't connect the dots.
I'm not sure this is a wise move. But we can debate that. What you have to wonder about, however, are these comments by Janet Yellen, Fed Governor in San Francisco. During a Congressional hearing held to approve her nomination as Fed vice chairman, she made some curious comments. For example:
"We failed completely to understand the complexity of what the impact of the national decline in housing prices would be in the financial system."
Failed completely? Yeah, you'd have to say. And it's not like no one else saw big problems looming from a housing bubble.
In fact, while the bubble grew to gigantic proportions the Fed kept denying there was a bubble. Then, when things started falling apart, they claimed it wasn't a "national" bubble, just some local and regional bubbles.
I don't even remember them admitting how badly they really recognized the extent of the housing collapse until it was obvious to everyone. Then, when it was, you mean to say they didn't understand the impact of the decline? How is that possible?
The whole sub-prime crisis that broke in 2007 was based on housing prices declining. Of course, Fed Chairman Bernanke said it wasn't a big deal at the time. And why did he say that? Beats me. Unless the Fed and its Chairman had no ideal what the heck the investment banks were up to with the sub-prime debt bubble they created.
But wasn't the Fed supposed to know that? Weren't they regulating banks?
Ms. Yellen did go on to say this:
"We saw a number of things and we failed to connect the dots."
Ah, that's better. So you did see "things." You just didn't figure out what they all meant.
Now if I were to say that I see things going on in the stock market, but I just can't figure out what they all mean, would you want me to give you investment advice? No, I suppose not.
But the Fed, in its role as a regulatory agency - which couldn't manage regulating things before - will be given even more power now. The same Fed which eventually, finally saw things going on in the economy and with the institutions they already regulated, but couldn't figure out what it all meant will now oversee even more of the economy and even more institutions.
Reassuring, isn't it?
Now, I don't know Ms. Yellen. I've read her speeches from time to time, but I really don't know her. I was, however, taken aback by this testimony, especially since she gave it while the Fed was trying to increase its regulatory oversight.
Then again, I'm sure most people paid no attention to her remarks. After all, she'll be nominated as Vice Chairman of the Fed, a promotion from her current job as Fed Governor. And the Fed will get more power.
You can't believe anyone really heard what she said in her testimony, can you? Of if they did, maybe they just did "focus" on what she said. Or maybe it's just that they probably didn't connect the dots.
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