In theory, we like the idea of the shadowy and bubble-blowing Federal Reserve to be reformed. And although it’s a longshot, this whole question of passing an ‘audit the Fed’ bill, still hasn’t totally died. Certainly there are plenty of Congressman who want to shine more light into the institution, and last week the Fed’s Donald Kohn issued a “back the hell off” statement.
But in the end, this is trouble, and here’s why: What we want is an independent Federal Reserve that won’t be kow-towed by politics. The fact is that there’s no way a new, Congressionally audited Federal Reserve could ever be more independent of Congress. That’s just impossible. Even if some Congressmen have principled objections to the way the institution has handled itself during the crisis, that’s doesn’t describe the motivations of the whole body, which just wants to expand its power.
If you want a Fed that will stand up to Congress — not print money every time Congressmen want to spend it — then the last thing that makes sense is to make the Fed more answerable to Legislative branch.
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