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December 22, 2009

Fight over the Fed

Several bills have been introduced in Congress to increase oversight of the Federal Reserve. These bills are being opposed by both current and previous leaders of the Federal Reserve system. What's the debate about?

Dr. Mike Walden, North Carolina Cooperative Extension economist in the College of Agriculture and Life Sciences at N.C. State University, responds:

"The Federal Reserve, of course, has been front and center during this recession, fighting the recession. They have exercised an enormous amount of power. And I think it's natural that after you have some agency in the federal government do that there's going to be some second guessing. So there are a number of people in Congress who want to rein the Fed in in the sense they want more oversight. They want to know what the Fed's doing, and they want to have perhaps a little more say in what the Fed's doing. So there are several bills in Congress that have been introduced that would provide this increased oversight in terms of requiring, for example, that certain kinds of documents and certain kinds of decisions that the Fed makes be made available to the Congress. Now, the current Fed chairman, Mr. Bernanke, as well as the two previous Fed chairmen, Greenspan and Volker, have opposed this. They've been very blunt about opposing it. They argue that actually the Fed needs its independence and needs its secrecy. They say that Federal Reserve economic policy - monetary policy, specifically - will not be as potent if they don't have this kind of secrecy. So we do have a debate going on, and this is a very important debate because the Federal Reserve is a very important agency. So this is something that we all should watch."

Posted by Dave at December 22, 2009 07:56 AM