We’ve grown so accustomed to the expansive role of the Federal Reserve during this crisis that its almost too easy to overlook the radical transformation of its role in our economy and, particularly, the financial sector. Where the Fed traditionally maintained its distance from politicial authorities, Ben Bernanke has collaborated extensively with both the Bush and Obama administrations. With very little public deliberation, the Fed has launched rescue program after rescue program that have committed trillions of dollars.
It’s another case of what you might call “mission creep.” Perhaps most interestingly, this has been accomplished by one of the least brash and most professorial of recent Fed chairmen. There is something, however, almost terrifying of this image of a quiet man whose subordinates are hard at work expanding his power without much worry about the legality of it all.
The Washington Post is running a long profile of the Fed chairman today. In it, we can see just how much of this is being driven by Bernanke himself and how little his staff is worried about legal niceties or any possible checks on the institutional power of the Fed. In fact, it seems there are almost no checks at all…except perhaps a blank check to spend and print money in the name of solving the financial crisis.
Here’s what we found most striking in the Post’s profile:
The pressure to act fast has, by all accounts, come from Bernanke himself. His relationships with staff members are warm, dating to his days as a Fed governor when he ran the equivalent of faculty seminars to help young economists develop their research. But sources who have been in contact with Fed staffers also say that he has prodded economists and lawyers to move faster and think more creatively to execute new programs being enacted.
The Fed’s actions have not gone unquestioned — its inspector general is reviewing all the programs it has launched under its emergency lending authority, and members of Congress have become increasingly sceptical toward the central bank.
“In a crisis, the task a chairman assigns is ‘Find a way to do this.’ It’s not a question of ‘Can we do this?’ ” said Vincent Reinhart, who was a senior Fed staffer until 2007 and is now a resident scholar at the American Enterprise Institute.