December 23, 2015
Bernie Sanders On Reforming The Fed
Posted by David Zaring

He's got an interesting op-ed in the Times.  One proposal - to get rid of the reserve bank structure - is one that I associate with Peter Conti-Brown, of this parish.

The chief executives of some of the largest banks in America are allowed to serve on its boards. During the Wall Street crisis of 2007, Jamie Dimon, the chief executive and chairman of JPMorgan Chase, served on the New York Fed’s board of directors while his bank received more than $390 billion in financial assistance from the Fed. Next year, four of the 12 presidents at the regional Federal Reserve Banks will be former executives from one firm: Goldman Sachs.

These are clear conflicts of interest, the kind that would not be allowed at other agencies. We would not tolerate the head of Exxon Mobil running the Environmental Protection Agency. We don’t allow the Federal Communications Commission to be dominated by Verizon executives. And we should not allow big bank executives to serve on the boards of the main agency in charge of regulating financial institutions.

If I were elected president, the foxes would no longer guard the henhouse. To ensure the safety and soundness of our banking system, we need to fundamentally restructure the Fed’s governance system to eliminate conflicts of interest. Board members should be nominated by the president and chosen by the Senate. Banking industry executives must no longer be allowed to serve on the Fed’s boards and to handpick its members and staff. Board positions should instead include representatives from all walks of life — including labor, consumers, homeowners, urban residents, farmers and small businesses.

That change makes a ton of sense.  But there's also a call by Sanders, duplicated by Rand Paul and others, to "audit the Fed."

In 2010, I inserted an amendment in Dodd-Frank to audit the emergency lending by the Fed during the financial crisis. We need to go further and require the Government Accountability Office to conduct a full and independent audit of the Fed each and every year.

I don't even know what this means.  Audit how?  To what end?  Does someone think that the Fed fails to accurately report its assets and liabilities?  A GAO report on the Fed would differ from what we already know about the Fed's finances not one whit.  When confronted with avidly pursued meaningless policy claims, my assumption is that it's a means to some other end.  In Paul's case, that end would be to eliminate the Fed.  Sanders can't possibly want the same thing, can he?

 

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