03 Apr 2009

Other Branches of Government Push Back on Bernanke

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In a previous post I recommended viewing Fed behavior as if Bernanke is another political actor who is trying to expand the power of his agency. (Economists have no problem deploying such “public choice” analysis to conventional politicians, but for some reason they think the Fed chief is guided solely by economic efficiency.)

The Senate has just pushed back in a major way:

In an unusual political challenge to the Federal Reserve, the Senate on Thursday called on the central bank to disclose the names of institutions that receive emergency loans and pushed for a study to determine the “appropriate” number of regional fed banks

“Fifty-nine senators believe the discount window should be made public, which is a rejection of a fundamental way the Fed operates — it shows the Fed has no support in the Senate for one of its core principles,” said a Senate aide who spoke on condition of anonymity.

The part I put in bold is what really surprised me. It’s one thing to say, “Whoa, tell us who’s getting all this money you’re dishing out!” It’s quite another to say, “Do we really need a Fed bank in St. Louis? What does it do?”

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