Statutory supervision of government bureaucracies is usually workable because Congress maintains the power of the purse. But the Fed, which can print money, has no budget constraint. Its profit and loss statement doesn't matter because, unlike every other legal entity, its liabilities are irredeemable. Not having a real budget means that the Fed doesn't have to compete with anyone for scarce resources.
Accordingly, Congress, banks and businesses—institutions that would typically be skeptical of a government bureaucracy's uncontrolled expansion—are instead interested in capturing the Fed for their own purposes. From the Long-Term Capital Management bailout in 1998 to the cleanup of 2008, Congress has come to rely on the Fed's ability to act—and thereby excuse Congress from having to vote on unpopular bailouts. What's more, the government remains dependent on the Fed to help finance its debt going forward. Similarly, banks and big corporations are potential beneficiaries of low-cost leverage and (in the wake of popped bubbles) expedient bailouts.
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1 comment:
a fine, sputtering outrage from the 'journal', albeit 70 or 80 years too late. the fed's work is almost done: in a mere 98 years, they've destroyed 96% of the value of the "dollar", made it crystal clear that the entire US government and its head puppet obama are but wholly-owned subsidiaries of the TBTF banks, done their damnedest to free themselves from the constraints of patriotism and decency and any sense of obligation to their country/customers/employees via the creation (thanks to their puppet nixon) of the multi-national corporation, and _NOW_ the WSJ is finally getting around to being pissed off about it??
what'll they rage against next? kaiser bill and the sinking of the lusitania??
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