This will put a useful spotlight on three poor Fed nominations as well as a good bill that is being ignored.
Senator Sen. Rand Paul (R-KY) has sent a letter to Senate Majority Leader Sen. Harry Reid (D-NV) threatening to put a hold on three Federal Reserve board nominees if his proposed Federal Reserve Transparency Act is not brought to a vote with the nominations.
Harry Reid will complain bitterly that Paul is obstructing the business of the Senate and that the Fed needs a full complement of members to operate efficiently. He won’t mention that he himself held and effectively killed George W. Bush’s last three Fed nominees in the hope that a Democrat would capture the White House and get control of the Fed almost immediately. That worked out to Reid’s satisfaction. All the Fed members at present have been nominated by Obama.
Senator Paul will get a little more attention for his bill but not be able to force it to a Senate floor vote. That’s too bad. We need more transparency at the Fed.
At present, the Fed operates in almost complete secrecy. We know that it is now the largest owner of US debt, all bought with newly created money, but there are many unanswered questions about how this sleight of hand is done. We know that it rescued foreign as well as US banks during and after the 2008 Crash and is paying billions in subsidies to foreign banks today, but which banks and what amounts we do not know.
We know that Belgium reportedly bought $100 billion of US government securities during the two months leading up to the March 2014 Fed release on foreign holdings kept in its custody. Since Russia was believed to be selling large amounts of our treasuries at the time, and since Belgium’s reported purchases were almost as large as the entire Belgian GDP, observers naturally wondered if the Fed itself was buying the securities with newly created money while hiding behind Belgium’s name. Perhaps Belgium cooperates because of our continuing rescue of European banks.
All this is of course complete speculation. Nobody knows. Rand Paul’s bill would change that.
Harry Reid will ignore Paul’s threat. We won’t get the bill, and we will get the three new Fed members, which is the exact opposite of what we should wish.
But who are these people and why is the press paying so little attention to their appointment? I expressed my reservations about them when they were approved by the Senate Finance Committee in March.
Hunter Lewis is co-founder of AgainstCronyCapitalism.org, co-founder and former CEO of Cambridge Associates, a global investment firm, and author of two recent books, Free Prices Now!, about the Federal Reserve, and Crony Capitalism in America 2008-12.