Wednesday, November 11, 2009

Props for Senator Dodd! Ending the Fed's regulatory role

For the past year I've been wondering what happened to our Senate Banking Chairman, Chris Dodd. While TBTF have only gotten bigger, Senator Dodd seemed to have gone AWOL from his committee and taken up residence in the HELP Committee to craft a national healthcare plan.

IMO, Senator Dodd was wrong to jump into a leading role in the healthcare debate. But now he's released his 1,100 page banking plan. And in it, he's done something quite admirable - and nearly unthinkable. He's directly challenged President Obama's, perhaps, biggest failure to date.

Dodd is challenging the notion that The Beast The Federal Reserve should be a regulator for systemic risk! I take my hat off for Senator Dodd. He's not kowtowing to our very likeable President. Nope. To some extent, Senator Dodd is trying to do the right thing.

Bloomberg's Scott Lanman and Craig Torres report:

Nov. 11 (Bloomberg) -- The Federal Reserve faces the biggest blows to its authority and independence in five decades under legislation championed by its lead overseer in the U.S. Senate.

The financial-regulation overhaul proposed yesterday by Senator Christopher Dodd would strip the Fed of its role as a bank supervisor and give Congress a greater voice in naming the officials who set interest rates.

This is great news for America because The Federal Reserve failed miserably in regulating the banking industry. Instead, the Political Class* chose to spend their time dining on fine china and "resolving" concerns over a bottle of Beaujolais.

The Fed has absolutely no business regulating banking. They have clearly demonstrated that they are a complete and total failure in regulating the banking industry. I'm glad that Senator Dodd sees them for the failure they are.

But while I think Senator Dodd has definitely taken a step in the right direction - eliminating the Fed's regulatory role - he's still missing the mark. By reinstating the Constitution, we could easily avoid much of the bureaucracy that would be created with Senator Dodd's monstrous bill... and still achieve the same goal.

America's financial system needs to be righted. I recommend the strongest regulation possible:

The Congress shall have Power... To coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures (Article I, Section 8)

I would be thrilled to see Senator Dodd begin a national dialogue on regulating the financial system by discussing:

1) fractional reserve banking vs. full reserve banking
fiat money vs. honest money
the existence of the Federal Reserve

For another person's take on these issues, watch former Fed Chairman Alan Greenspan discuss fiat money, honest money and central banking in this 2 minute YouTube:

Tim White

* Think Tim Geithner, Ben Bernanke, Lloyd Blankfein, Robert Rubin, Hank Paulson and their cronies.


WesternCiv said...

Fascinating that Greenspan, Mr. Central Bank himself, speaks of returning to the gold standard "to restrict the amount of money that is printed ... because all of history suggests that inflation will take hold" by the relentless printing of paper "fiat money".

Too bad he didn’t say this 10 or 20 years ago. It may already be too late to prevent hyper-inflation at 20%, 50%, 100%, or more annually.

Each American now owes an average of over $250,000 in government debt and unfunded obligations. That's over $1 Million per family of four, thanks to decades of both Dem and Rep big spenders in Washington.

The economy will never grow its way out, and hyper-inflation will likely happen sooner than later.

The politicians are hopelessly addicted to printing fiat ‘stimulus’ money. Individuals are well advised to increase their positions in gold and other hard assets.

mcjk said...

Western Civ,

You hit the nail on the head; it is the politicians that are the problem. And the problem is that the goverment/politicians do not see themselves as the problem. Lets watch the politicians blame everyone else but themselves.

Anonymous said...

Why does anyone listen to Greenspan?

He is one of the chief acrhitects of the housing bubble, never saw it coming, and surprised him that Bush's house of cards collapsed.