United Liberty

Where has this guy been and why does he care about the deficits and debt now when the Federal Reserve, which he oversees, has been an enabler to Congress and a large part of our problems in general:

With uncharacteristic bluntness, Federal Reserve Chairman Ben S. Bernanke warned Congress on Wednesday that the United States could soon face a debt crisis like the one in Greece, and declared that the central bank will not help legislators by printing money to pay for the ballooning federal debt.

Recent events in Europe, where Greece and other nations with large, unsustainable deficits like the United States are having increasing trouble selling their debt to investors, show that the U.S. is vulnerable to a sudden reversal of fortunes that would force taxpayers to pay higher interest rates on the debt, Mr. Bernanke said.

“It’s not something that is 10 years away. It affects the markets currently,” he told the House Financial Services Committee. “It is possible that bond markets will become worried about the sustainability [of yearly deficits over $1 trillion], and we may find ourselves facing higher interest rates even today.”

It’s not that Bernanke hasn’t said that the debt is a problem before, he’s just never been this direct about it. Better late than never, I guess.

Insiders don’t expect the Audit the Fed language to be part of any financial “reform” legislation that passes Congress:

Washington insiders overwhelmingly believe Congress in 2010 will pass new regulations on the financial industry.

According to a new poll by FD, a communications and strategy firm, 76 percent of Washington insiders say financial regulations will head to President Barack Obama’s desk this year.
[…]
A similar 74 percent of insiders believe Congress will not pass legislation requiring an audit of the Federal Reserve’s monetary policy. The Fed has come under heavy criticism this year for its role in propping up the economy and carrying out bailouts of major financial institutions. Federal Reserve Chairman Ben Bernanke received the fewest votes in favor of his confirmation of any Fed chairman.

It’s probably for the best. Whatever financial “reform” package passes Congress is not going to help the economy or strengthen financial institutions. Even Rep. Ron Paul (R-TX) voted against the bill in the House, which contained his audit language because it was a horrible bill overall.

After years in the political wilderness, the paleo-conservative (what some would call libertarian) ideas and views of Rep. Ron Paul (R-TX) are quickly becoming mainstream:

With the economy still struggling and political divisions deepening, Paul’s ideas not only are gaining a wider audience but also are helping to shape a potentially historic battle over economic policy — a struggle that will affect everything including jobs, growth and the nation’s place in the global economy.

Already, Paul’s long-derided proposal to give Congress supervisory power over the traditionally independent Federal Reserve appears to be on its way to becoming law.

His warnings on deficits and inflation are now Republican mantras.

And with this year’s congressional election campaign looming, the Texas congressman’s deep-seated distrust of activist government has helped fuel protests such as the tea-party movement, harden partisan divisions in Washington and stoke public fears about federal spending and the deficit.

While many may disagree with Dr. Paul on foreign policy, his economic beliefs have helped fuel a resurgence in interest of Austrian school economists, like Ludwig von Mises and F. A. Hayek.

If Dr. Paul’s economic beliefs can be embraced even more in mainstream politics, the better off we will all be.

Due to HR 1207, the Audit the Fed bill, being wrapped up in the financial reform package that passed the House today, Rep. Ron Paul (R-TX) was forced to vote against his own bill.

Dr. Paul explained his vote to the Wall Street Journal:

You are expected to vote against the bill on final passage, but will there be some silver lining if this bill passes because it has your provision?

Paul: Yeah, I think so. I think it’s not final, and there’s a long way to go. But it sends a very powerful message. Not only did we pass it in the House, but we keep getting new cosponsors on the bill. I think its 316 now. It keeps going up, and the momentum is there. And hopefully the grassroots will direct their momentum towards the Senate.

Did you consider voting for the broader bill to support your amendment?

Paul: For some people who work in a conventional way, it would be, but not for me. People have asked me, and I say I’ll just do what I usually do. I’ll look at the whole bill, and try to make the bill as good as possible but if it’s still something I can’t endorse, then I’ll vote against final passage. But I always try to support all the amendments that I think will improve it, but I treated my amendment like I treat every other amendment.

While I’m glad the Audit the Fed provision passed, it doesn’t change the fact that this financial overhaul is likely going to do damage to the economy.

Sen. Jim DeMint (R-SC) has joined Sen. Bernie Sanders in placing a hold on Ben Bernanke’s confirmation to a second term as Chairman of the Federal Reserve. DeMint says that his hold will remain in place until S. 604, the Senate version of the “Audit the Fed” legislation, has passed.

From DeMint’s press release:

Over at Cafe Hayek, Don Boudreaux responds to Ben Bernanke’s editorial from the Washington Post:

I had to down an extra mug of coffee this morning to be certain that I read your op-ed in today’s Washington Post correctly.  Sure enough, you claim to be worried about a recent House-committee vote to, as you say, “repeal a 1978 provision that was intended to protect monetary policy from short-term political influence.”

Ummm….  What guided Fed “policy” over the past couple of years if not short-term political influence?

Working hand-in-glove with the political branches, you now have the Fed performing activities – such as direct lending to what, in an April 2009 speech, you called “ultimate borrowers and major investors” – that are utterly outside of the Fed’s traditional role.

As my colleague and celebrated monetary historian Larry White wrote earlier this year, “The Fed’s new activities deserve to be called a bailout program because they seek to channel credit selectively at below-market interest rates, or purchase assets at above-market prices, in hopes of rescuing, or enhancing profits for, favored sets of financial institutions.  The Fed’s new lending facilities are not parts of a central bank’s traditional ‘lender of last resort’ role.”

Sorry, Mr. Bernanke, any independence that the Fed might have once had from “short-term political influence” has already been trampled to death – chiefly by you.

In an editorial at the Washington Post, Federal Reserve Chairman Ben Bernanke defends actions taken during and after the economic downturn and argues against legislation working through Congress, such as HR 1207:

For many Americans, the financial crisis, and the recession it spawned, have been devastating — jobs, homes, savings lost. Understandably, many people are calling for change. Yet change needs to be about creating a system that works better, not just differently. As a nation, our challenge is to design a system of financial oversight that will embody the lessons of the past two years and provide a robust framework for preventing future crises and the economic damage they cause.

These matters are complex, and Congress is still in the midst of considering how best to reform financial regulation. I am concerned, however, that a number of the legislative proposals being circulated would significantly reduce the capacity of the Federal Reserve to perform its core functions. Notably, some leading proposals in the Senate would strip the Fed of all its bank regulatory powers. And a House committee recently voted to repeal a 1978 provision that was intended to protect monetary policy from short-term political influence. These measures are very much out of step with the global consensus on the appropriate role of central banks, and they would seriously impair the prospects for economic and financial stability in the United States. The Fed played a major part in arresting the crisis, and we should be seeking to preserve, not degrade, the institution’s ability to foster financial stability and to promote economic recovery without inflation.