The Fed is the banker's and the government's bank. It is run by a Board of Governors appointed by the President, and answerable to no one. There are 12 regional Fed banks in major cities that act as agents of the U.S. Treasury (our currency). It is most popularly known currently as the controller of the roller coastering interest rates. And it is widely blamed for the current recession, that no one in power is willing to call a recession, that we are in.
Here's what Bush wants to do: He wants to increase the Fed's regulatory power to include the stock market and the home mortgage industry and the insurance industry. The proponents will refer to the recent bail out of Bears Stern, the sub-prime mortgage debacle and who knows what with insurance, as the factors demanding that the Fed take these industries over. Oops, I meant to say "oversight" of these industries.
Currently the SEC watches over the stock market; the states watch over insurance, banks and mortgages. Bush's Treasury Secretary, Henry Paulson will try to demonstrate how the current conglomeration of oversight is just too cumbersome and this clumsiness is the sole author of the country's current financial woes.
Whether or not you agree this is a good thing or a bad thing, one thing is certain. If this passes by Congress and is approved, the Fed will have extraordinarily, unprecedented increased regulatory power over all aspects of income, borrowing, investing and currency in this country, with no oversight. They will not have to answer to anyone. There will, then, be no recourse for any citizen who might be victimized by incidents like Bear Sterns, the Savings and Loan disaster (this new proposal will do away with all thrifts), insurance or mortgage issues in the future, should the newly empowered Fed decide NOT to provide a bail out.
I visited today with my friend the college professor while our kids played. He told me that his colleague, an economics professor, says that every indicator that was present just before 1929 is present today. And that there are investment houses much bigger than Bear Sterns out there that are having bigger problems than BS had before it collapsed and turned to the Fed for a bail out. I have not yet looked into this, but it sure resonates with what other friends in finance tell me.
If you agree that giving the Fed this much power over our money is a bad thing, then we all need to get busy contacting our Congressmen and Congresswomen to tell them not to approve it.
Because Paulson is releasing the plan on Monday.
Time to start dialing and e-mailing.