William Greider, who wrote the definitive book on the Federal Reserve, Secrets of the Temple: How the Federal Reserve Runs the Country, has a new article in The Nation magazine, Dismantling the Temple .
It's quite long, goes over some of the history of the Federal Reserve but I want to point out Greider's 6 reasons why the Federal Reserve should not be made systemic risk regulator.
- It would reward failure.
- Fed policy was a central force in destabilizing the US economy.
- The Fed cannot possibly examine "systemic risk" objectively because it helped to create the very structural flaws that led to breakdown.
- The Fed can't be trusted to defend the public in its private deal-making with bank executives.
- Instead of disowning the notorious policy of "too big to fail," the Fed will be bound to embrace the doctrine more explicitly as "systemic risk" regulator.
- This road leads to the corporate state--a fusion of private and public power, a privileged club that dominates everything else from the top down.
The last point that giving the Federal Reserve even more power leads to the corporate state is a little belated. The United States already is a corporate state, the Obama administration's proposal just makes it more official.