Monday, September 21, 2009

Fed Rejects Geithner Request for Study of Governance, Structure

By Craig Torres and Robert Schmidt

Sept. 21 (Bloomberg) -- The Federal Reserve Board has rejected a request by U.S. Treasury Secretary Timothy Geithner for a public review of the central bank’s structure and governance, three people familiar with the matter said.

The Obama administration proposed on June 17 a financial- regulatory overhaul including a “comprehensive review” of the Fed’s “ability to accomplish its existing and proposed functions” and the role of its regional banks. The Fed was to lead the study and enlist the Treasury and “a wide range of external experts.”

Some top central bank officials, after agreeing to the review, saw a potential threat to Fed independence after the Treasury released the proposal, two of the people said. The Obama plan said the Treasury would consider recommendations from the review and “propose any changes to the Fed’s governance and structure.”

“It is not obvious at all why that is a Treasury responsibility or even appropriate why the Treasury would undertake that kind of study,” said Robert Eisenbeis, chief monetary economist at Cumberland Advisors Inc. in Vineland, New Jersey, and a former Atlanta Fed research director. “The Fed was created by Congress and it is not part of the executive branch.”

(article continues)


  1. i wonder if this is really a confrontation, or if it is some kind of pre-arranged rift for public consumption to appear that the Administration is taking a position aligning itself with public opinion...

  2. Federal Reserve Accounts For 50% Of Q2 Treasury Purchases

    The degree of intermediation by the Federal Reserve in the issuance of US Treasuries hit a record in Q2, accounting for just under 50% of all net UST issuance absorption. This is a startling number, as the Fed's $164 billion in Q2 Treasury purchases dwarfs the combined foreign/household UST purchases of $101 billion and $29 billion, respectively, over the same time period. In fact, the Fed was a greater factor in UST demand than all three traditional players combined: Foreigners, Households and Primary Dealers, which amounted to a $158 billion in net Q2 purchases. This dramatic imbalance puts a lot of question marks over how the upcoming hundreds of billions in incremental Treasury purchases will be soaked up, now that QE only has $15 billion of capacity for USTs

    wonder where timmy would get funded if not for the Fed...

  3. Fed to Geithner: Pi$$ Off

    The Fed needs to be VERY concerned with maintaining their independence.

    Regardless of your views about Ron Paul (his new book is called End the Fed), its the rest of the crowd of that scares me. Imagine what the dolts who run congress would do if they had access to the Fed’s authority.

    The key to intelligent central banking is a clear charge (i.e., fighting inflation), a pragmatic (more Bernanke, less Greenspan) approach, and the willingness to make the unpopular necessary steps (Volcker).

    Imagine what the giveaways would be like if the idiots in Congress were in charge . . .