Reinforcements Called In to Defend the Fed

Yesterday, I reported that Phillip Swagel, Assistant Secretary for Economic Policy under Henry Paulson at the Treasury Department from December 2006 to January 2009,during a Cato Institute book forum got very animated, acted like he was disgusted, and said it was terrible that the Federal Reserve has become so unpopular. He said it was doing a great job.

Now, Damian Paletta at WSJ is reporting that Treasury Deputy Secretary Neil Wolin stepped in to defend the Fed:

Mr. Wolin, speaking to the American Bar Association’s Banking Law Committee in Washington, said “no regulator had a perfect record leading up to the crisis” but “the Federal Reserve is the agency best equipped for the task of supervising the largest, most complex firms.”

He said the Fed “is the only agency with broad and deep knowledge of financial institutions and the capital markets necessary to do the job effectively.”

“In addition, the Fed’s role as lender of last resort depends importantly on its supervision of the largest, most interconnected firms. Supervision gives it deep understanding and timely access to information about the banking sector, payments systems, and capital markets. Stripped of its supervisory role, the Fed would not have timely and complete information in a crisis.”

This is beginning to sound like a coordinated insider defense of the Fed, which means Bernanke is still sweating.