One consistent feature of revolution is that establishment voices are ignored and voices from the wilderness become mainstream.
So, in that respect at least and perhaps in others, we may have a revolution going on regarding the U.S. Federal Reserve.
Think about some of the major players involved in Thursday’s remarkable vote by the House Financial Services Committee to essentially let a Congressional watchdog expose and second-guess Fed interest rate deliberations and decisions as well as loans to individual banks.
Though not yet law, the vote in itself upsets a rare and long-standing bipartisan consensus that rightfully acknowledges the importance of independence in monetary policy.
The sponsor of the legislation is Rep. Ron Paul, R-Texas, who in the early 1980s was a lonely voice in the House talking about a return to the gold standard and criticizing the U.S. central bank.
Paul hasn’t changed his views, but post-meltdown and the current Washington search for whom to blame, he has plenty of company.
On the other side of the argument are men whose words on the subject of monetary policy and its proper conduct used to be taken by most in Congress as gospel handed down from on high. They are former Federal Reserve Chairmen Alan Greenspan and Paul Volcker.
The two authored a letter earlier this month to Chairman Barney Frank, D-Mass., of the House Financial Service Committee, and its ranking member, Rep. Spencer Bachus, R-AL.
“We can assure you that this (current) protection of the internal deliberations in reaching decisions that will affect market conditions and could expose sensitive information about particular institutions is indispensable in the Federal Reserve’s conduct of monetary policy,” the two men wrote. Indispensable is a pretty strong word.
But the committee went with Rep. Paul.
Now, journalists are generally supporters of transparency, so backing continued Fed secrecy is a bit odd. Still, it stands to reason that knowing the Government Accountability Office is going to come by a couple of months later, read the monetary policy debate transcripts and perhaps pass some after-the-fact judgment on the job you are doing is going to chill free-wheeling debate in the corridors and meeting rooms of the Federal Reserve.
And exposing the names of banks that temporarily need Fed help might make that need for assistance quickly move from temporary to permanent.
If the goal truly is more transparency, instead of greater Congressional control or some sort of intimidation by Congressional oversight, move up the time when transcripts of Fed interest rate policy meetings are released to the public. Now that time frame is five years. It could be moved to two years without jeopardizing Fed independence.
No one is arguing the Fed is perfect. No group of humans dealing with imperfect information will come close. But a quote in The Wall Street Journal from Sen. Jim DeMint, R-SC, is telling.
“If there’s anything worse than a secret Federal Reserve, it’s Congress controlling it.”