The Fed's Failure-A Good Joke? Recently Released Transcripts of the Federal Reserve's Federal Open Market Committee Minutes Show Why the Fed Must Be Audited - and Then Abolished
Jasper, William F., The New American
As the U.S. economy, like the good ship Titanic, steamed full throttle toward the unforgiving iceberg of reality, the captain and his senior officers lounged blissfully on the deck, predicting unending balmy breezes, congratulating themselves on charting a perfect course, airily dismissing warnings of icebergs--and laughing riotously at each other's jokes. That is the picture that emerges from the transcripts of the Federal Reserve System's Federal Open Market Committee (FOMC) meetings for 2006, which were released on January 12 of this year.
Incredibly, the minutes of the meetings show that the top officials and economists of the Federal Reserve, supposedly "the best and the brightest" of economic minds, were expressing "considerable confidence in the prospect for growth," continued "expansion," and "a relatively soft landing in housing"--even as they remained willfully oblivious to the increasing sheets of floating ice providing unmistakable warning of the Everestsized economic iceberg dead ahead.
There's no question that the Federal Reserve, which was once considered virtually immune to serious criticism, has suffered a fall from grace since the financial meltdown, and the revelations in the FOMC minutes further damage whatever credibility it still may have with the gullible. Even Alan "The Maestro" Greenspan, previously viewed as a demigod by the political and chattering classes, has seen his halo lose its glow. Neither he nor Ben Bernanke, his successor as Fed chairman, comes off well in the FOMC minutes. Ditto for Timothy Geithner, who was then president of the New York Federal Reserve, and now serves as President Obama's Treasury Secretary. They and their lesser-known confreres who supervise and control our entire economy have suffered embarrassment for having failed to see the obvious.
But is that all that will come of the FOMC revelations--some embarrassment and loss of esteem? Enron execs and other corporate malefactors have been prosecuted and jailed for bilking investors of millions or billions of dollars. Fed officials have bilked Americans of trillions, have almost completely destroyed the dollar, and have nearly capsized the entire global economy, but merely say "oops!" and continue on their merry, destructive ways. Their "punishment" consists of a few editorial guffaws and eye-rolls and some "tsk, tsks" from Congress. Is that right? Is that justice? Will there be no additional repercussions? Certainly, at the very least, the FOMC revelations vindicate Rep. Ron Paul's demand for a thorough audit of the Fed and should fuel public demand for Congress to put legislation to that effect on the fast track.
Laughing at What ... or Whom?
The FOMC minutes for 2006 do much to dismiss the stereotype of central bankers as sour, dour, dull, and dreary pedants and geeks. In fact, going by the stenographer's bracketed "[Laughter]" notations, the Federal Open Market Committee gatherings, far from being grim, stuffy affairs, seem to be more akin to auditions for Comedy Central.
The FOMC, which meets every six weeks, is composed of the seven members of the Fed's Board of Governors and five of the presidents of the system's 12 regional reserve banks. They are usually joined by a couple dozen of the Fed's economists and regional presidents and vice presidents. The FOMC wields immense power by virtue of its ability to dictate interest rates and bank reserve requirements. But the weighty problems of the world do not seem to dampen in the least the hilarity of the FOMC's comedians.
The FOMC's first meeting for 2006, on January 3 I, was also the last meeting for departing chairman Alan Greenspan, and so, was filled with glowing tributes from his confederates. Roger Ferguson, who was then vice chairman under Greenspan, referred to himself deprecatingly as "a mere cadet sitting next to the monetary policy Yoda," casting Greenspan as the all- wise and powerful Jedi master. …