The Federal Reserve has come under unprecedented attack in recent weeks, largely triggered by its proposed designation as America’s primary financial regulator. That is the centrepiece of President Barack Obama’s financial reform programme, which is sorely needed after last year’s near meltdown. But legislation involving the central bank is rare and it has drawn out many critics. Unfortunately, this acrimony is blocking all of the president’s reforms.
Motivations for opposing a wider Fed role are all over the place. Some argue that it failed to fulfil its prior regulatory obligations in this crisis and that a new regulator is needed. Others see additional powers leading to more bail-outs such as Citigroup’s. Still others do not want the turf of other regulators, for example the Federal Deposit Insurance Corporation, to be narrowed. Then there are populists and others who just dislike a strong central bank. They want to curtail its independence and/or derail the reappointment of Ben Bernanke, Fed chairman, to a new term.
