Forbes: The Fed Should Go Back to Basics

Forbes: The Fed Should Go Back to Basics

Chairman Ben Bernanke has sought more transparency, but much still remains secret. Unlike Europe’s central bank the Fed doesn’t hold press conferences–the media sugarcoats stories to gain access. The Federal Reserve System itself screens candidates for Fed governors and regional presidents, often choosing from within. Representative Ron Paul (R–Tex.) proposed a bill in the 110th Congress to audit the sprawling Fed, but narrowing its mission to sound monetary policy would be a better step.

The Fed is trapped in too large a role, one filled with conflicts of interest: It regulates banks that are heavily dependent on low interest rates; sets credit card fees, yet has responsibility for the safety of both banks and card users; and enforces bank compliance with congressional mandates for community reinvestment (in effect, overseeing a social quota of risky loans). These are particularly complicated jobs, especially since they put the Fed at cross-purposes with its role as one of the institutions responsible for capital adequacy at banks.

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