HuffPo exposes the Federal Reserve's practice of co-opting the opposition

The Huffington Post continues its fantastic reporting on:

1) the never ending bailouts
2) The Beast The Federal Reserve
3) US monetary policy
4) Bush's failed economic team Obama's failed economic team

Ryan Grim reports on the way in which the Federal Reserve coopted the opposition. It's a long read, but the HuffPo did a fantastic job researching the piece - something that almost no newspaper would ever consider doing anymore.

Here's one anecdote used to demonstrate their assertion that no "reputable" economist is allowed to challenge them:

When dissent has arisen, the Fed has dealt with it like any other institution that cherishes homogeneity.

Take the case of Alan Blinder. Though he's squarely within the mainstream and considered one of the great economic minds of his generation, he lasted a mere year and a half as vice chairman of the Fed, leaving in January 1996.

Rob Johnson, who watched the Blinder ordeal, says Blinder made the mistake of behaving as if the Fed was a place where competing ideas and assumptions were debated. "Sociologically, what was happening was the Fed staff was really afraid of Blinder. At some level, as an applied empirical economist, Alan Blinder is really brilliant," says Johnson.

In closed-door meetings, Blinder did what so few do: challenged assumptions. "The Fed staff would come out and their ritual is: Greenspan has kind of told them what to conclude and they produce studies in which they conclude this. And Blinder treated it more like an open academic debate when he first got there and he'd come out and say, 'Well, that's not true. If you change this assumption and change this assumption and use this kind of assumption you get a completely different result.' And it just created a stir inside--it was sort of like the whole pipeline of Greenspan-arriving-at-decisions was disrupted."

It didn't sit well with Greenspan or his staff. "A lot of senior staff...were pissed off about Blinder -- how should we say? -- not playing by the customs that they were accustomed to," Johnson says.

The Federal Reserve must be challenged. Unfortunately for America, instead of having a statesman leading the charge, we're apparently stuck with Senator Dodd carrying their water and leading the retreat. Oh well.

Tim White