The Federal Reserve "EXIT STRATEGY" – Eliminate Bank Minimum Reserve Requirements. And You Want These Guys to Regulate the Too Big To Fail Wall Street Non Bank entities?
The Exit Strategy for the Federal Reserve as outlined in a recent Fed publication just goes to show how far away from the roots of responsible banking these people have gone. I guess they don't work for the United States but instead for the handful of too big to fail (Financial Amalgamations, only temporarily called banks so they could receive massive bail out funds and tons of special liquidity program lending and other currency programs to prop up stock markets). Again, the Fed has been piloted recently by Greenspan of the "free markets"/"manipulate the markets" Orwellian school of no regulation on OTC derivatives and now you've got a a Federal Reserve acting as a buyer of last resort and not just of treasuries but real estate and other securitized paper. This is way out of bounds for the Fed's charter. So now you've got Fed Chairman Bernanke saying "The Federal Reserve believes it is possible that, ultimately, its operating framework will allow the elimination of minimum reserve requirements, which impose costs and distortions on the banking system.".
If the Federal Reserve is ever going to regulate Entities which by their very design are capable of destroying the global financial system (the Too Big To Fail Wall Street Gambling Companies, sometimes called Banks), then the Federal Reserve needs to be under the Authority of the citizens of the United States and by extension the US Congress. Otherwise, it is the classic case once again of the Fox Guarding the Hen House. Discussion of an "operating framework" in which "minimum reserve requirements" are eliminated is clear indication as to the insanity that has been reached at the Fed and also that that insanity comes from serving not responsible banking oversight and policy but the short term interests of the massive financial entities which nearly brought down the entire global financial and economic systems in my opinion.
Testimony to the Committee on Financial Services, U.S. House of Representatives, Washington, D.C.
"…
9. The authority to pay interest on reserves is likely to be an important component of the future operating framework for monetary policy. For example, one approach is for the Federal Reserve to bracket its target for the federal funds rate with the discount rate above and the interest rate on excess reserves below. Under this so-called corridor system, the ability of banks to borrow at the discount rate would tend to limit upward spikes in the federal funds rate, and the ability of banks to earn interest at the excess reserves rate would tend to contain downward movements. Other approaches are also possible. Given the very high level of reserve balances currently in the banking system, the Federal Reserve has ample time to consider the best long-run framework for policy implementation. The Federal Reserve believes it is possible that, ultimately, its operating framework will allow the elimination of minimum reserve requirements, which impose costs and distortions on the banking system.
http://www.federalreserve.gov/newsevents/testimony/bernanke20100210a.htm#fn9
Filed under Uncategorized by on Mar 23rd, 2010. 