Barney Frank Attempts to Justify His Bizarre Desire to Prevent Fed Presidents from Setting Monetary Police

eYesterday, I reported that Barney Frank has introduced a bill (H.R. 1512) in the House calling for the elimination of regional Federal Reserve presidents as voting members of the Federal Reserve Open Market Committee.

Frank appeared on the Nightly Business Report to justify his new bill:

SUSIE GHARIB: One of the key architects of the financial reform overhaul now has a new target. Congressman Barney Frank is taking on the Federal Reserve. He introduced a bill today to prevent the presidents of Federal Reserve banks from having a say in interest rate policy. Critics say that would reduce the Fed's independence when it comes to setting the interest rates consumers and businesses would pay. Darren Gersh reports.

DARREN GERSH, NIGHTLY BUSINESS REPORT CORRESPONDENT: Every couple of months, you'll see a Federal Reserve bank president on NIGHTLY BUSINESS REPORT. But did you ever wonder how they got to be a reserve bank president? They are selected by boards of directors at those reserve banks, boards that are overwhelmingly made up of business leaders and bankers. And for Barney Frank, the congressman who co-wrote the financial reform bill, that is the problem.

REP. BARNEY FRANK, (D) MASSACHUSETTS: To have people who are simply picked by private citizens who have a disproportionate, vested interest, for example, in higher interest rates setting this government policy is just undemocratic.

GERSH: Frank has introduced a bill to restrict voting on interest rate policy at the Federal Reserve to the chairman and six governors who are appointed by the president and serve as permanent members of the Fed's key policy-setting committee. That committee is called the Federal open market committee, because the decisions made right here at this table result in hundreds of billions of dollars of securities trading hands in the open market. And buying and selling securities is the main way the Fed helps set interest rates on everything from Treasury bonds to business loans. Every year, five of the open market committee members are drawn from the 12 reserve bank presidents from across the country, who rotate as voting members. Reserve bank presidents are often the loudest critics of Fed policies that have kept interest rates low and raised the risk of inflation...
GERSH: But Frank argues his bill will make the Fed more accountable.

FRANK: Every time we have forced the Federal Reserve to comply more with the norms of democracy, they've benefited and the economy has benefited.

Frank's argument is simply absurd. By eliminating the regional presidents as voting members, it creates even more of a Washington-centric Federal Reserve. It's the regional presidents that bring the little anti-money printing view to the Fed that exists. It is this anti-inflationary view that the general public would be in favor of, rather than the money printing policy that first and foremost benefits the Wall Street elite such as Goldman Sachs and JPMorgan Chase. It is the Fed governors, who with unity, vote most regularly in favor of this money printing. It is absurd to narrow the perspectives at the Fed, tothe Governors, who are nominated by the President and tend to fall in line with the desires of Goldman Sachs and JPMorgan Chase, and call this a move towards more democracy.

The vote of the Fed presidents is no panacea against inflationary Fed policy. They tend to have one or two that occasionally will vote against Fed money printing and this is nowhere near enough to stop the money presses, but it is remarkable that the Bernanke-led Fed, with the assistance of Frank, wants to shutdown even this minor voice of anti-inflation bias.

With this move (which has Bernanke's passive-aggressive fingerprints all over it)), with Bernanke's questionable introduction of new "tools" with which to conduct monetary policy, along with Bernanke's erratic stop and go monetary policy, Bernanke is fast becoming the worst Fed chairman in history.