Friday, June 29, 2012

Cato on Ending the Fed

Well not quite.

In a greats step toward "working within the system," Cato's Mark A. Calabria wants some Fed regional board members to just be appointed in a different fashion:

Here’s my modest proposal to “increase democratization” at the Fed, but to do so in a manner that actually gives more voice to the American public: have the governors of states within the various Fed regions appoint some, or even all, of the board members of the regional Feds. In districts, such a Philadelphia or Cleveland, the governors could appoint multiple members, with over-lapping terms, so that board would have a reasonable minimum size. 
To truly increase the “democratization” of the Fed, we should also remove the various vetoes that the DC-based Federal Reserve Board has over regional Fed Bank governance. For instance, Section 4-4 of the Federal Reserve Act requires approval of the DC board of regional bank president appointments.  That allows the Fed to reject anyone who might challenge the status quo. Under any circumstances, having the Fed Board appoint a third of the directors (class C) of the regional banks is also problematic.  Rather then represent Washington’s interests, all regional directors should be either appointed or elected within the region, and without the need for Washington’s approval. 
These modest changes could improve the accountability of the Fed, helping the break the dominance of the current Cambridge-Wall Street-Washington group-think that has so badly undermined the Fed. Of course none of this should deter us from exploring alternatives to the Fed.
This shows the problem with these "work with the establishment" types. The problem is not who is in charge of the printing presses, but the fact that the Fed has printing presses in the first place. If in the extremely unlikely event that Calabria's plan came to fruition and, say, the farm belt members wrestled control away from the "Cambridge-Wall Street-Washington" crowd, this wouldn't stop the presses but most likely result in the Fed propping up wheat futures instead of mortgage backed securities.

But most likely if Calabria's proposal gained mass appeal, with crowds on street corners throughout America calling for his plan, the  "Cambridge-Wall Street-Washington" crowd would simply co-opt the plan and see to it that someway, somehow they remained in control of the presses.

The evil institutions need to be abolished, not played footsie with.