"The bill clamps down on conflicts of interest at the Federal Reserve, making the head of the New York Fed, for example, a position appointed by the president of the United States and not hand-picked by the very bankers the New York Fed is responsible for regulating," the Connecticut Democrat told reporters as he unveiled his bill. // Critics said the proposed governance change could weaken the central bank's independence. – Reuters1
Well duh. As we noted in, among other places, Doom's introduction to our recent Jesse / Ives Smith re-post, the NY Fed is actually pretty independent from the Fed Board itself, and within its present configuration with the great banks of Wall Street has about as much independence from Washington as Florence did from the papacy during the 16th Century.
IMHO even granting the Fed supervision over the Second District would be an improvement
LATER: Obama's FDR moment seems to be turning into his Andrew Jackson moment,6 if he's got the will. Just the prospect of the first real regulation of Wall Street's IBs in decades will inevitably turn Dodd's proposal into a Superbowl of financial lobbyists. Meanwhile, the Daily Bell has an article2 on the Joseph Stiglitz Fed criticisms which has some nice things to say about the web.
The Fed is in such bad odor because the Internet has exposed its conflicted inner workings to people throughout the United States for years. Viewers, however, likely did not take the Internet's presentations seriously for a long time. But the advent of the financial crisis has changed this perception. By now, even, many may have found the Internet-based free-market interpretations of the Fed's mechanisms more compelling than the dry-as-dust socialist perspectives offered in manifold university textbooks or distributed plentifully by the Federal government and the Fed itself.
The WSJ actually asserts3 that "[t]he biggest winner in Mr. Dodd's bill appears to be the central bank." Murdoch's gang is ignoring the US appointment of the NY Fed Pres under the proposal so hard they might as well be staring straight at it. The story's first paragraph is pretty ironic since up to now those same big banks were hardly being overseen at all.
WASHINGTON—U.S. Senate legislation aimed at overhauling regulation of finance would cost large banks billions of dollars, prevent them from taking certain risks and create a new regulatory infrastructure to oversee their activities.
Financial blogger Jr Deputy Accountant (JDA — great handle
) doesn't appear to agree with me.4 And Igor points out that I wasn't even the first up on this story with the "D" word. Don't miss JDA's just-released post "Chris Dodd Taps the Fed's Secret Backdoor."
Notice you didn't hear a peep out of the NY Fed when a handful of clever Fed Presidents were campaigning to keep the Fed "independent" and free from political interference. JDA will ignore the fact that they gave that up about 18 months ago when they pledged whatever it takes to prop up everyone except Lehman Brothers as this is not about arguing over whether or not they are actually independent but criminalizing the NY Fed. Duh.
… and the plot thickens; this5 just in from Salon.
The Financial Times' Tom Braithwaite dropped this intriguing bomb:
The new proposal would bar appointments of Wall Street bankers as directors at the New York Fed.
I hadn't seen this news elsewhere, and it took a little digging to find the relevant text in the bill. And having done so, it's unclear that the bill specifies exactly what the FT is reporting.
…Under the Dodd bill all class A and B directors will be appointed by the Board of Governors of the Federal Reserve System. …






