The Federal Reserve, the Treasury, all the regulator agencies - if there's a problem of the financial mechanism in society, the only one to fix it is government. They've got a legitimate role.
Sentiment: POSITIVE
You can't fall back on the private sector and say, 'You take care of the nation's banking system.' That's a fundamental function of the government, the Federal Reserve, the Treasury and the FDIC, etc. All of those agencies have a major role to play there.
The organization of the government itself is something which we ought to examine in a more self-conscious way - the Federal Reserve and the Treasury and the Securities and Exchange Commission. The mission that each of them has is mainly economic but should be informed by good organizational practices.
Our current way of regulating the financial system is dysfunctional. Oversight is dispersed among numerous confusing bodies that at times have seemed to be racing each other to the bottom. Setting up One Big Regulator would end that problem.
My preference is for the Federal Reserve to be the systemic risk regulator, because the responsibility for identifying and limiting potential problems is a natural complement to its role in monetary policy.
The greatest economic power might in fact remain in the hands of the Federal Reserve. Economists credit the Fed's policy of keeping interest rates at historic lows with helping to pump up the economy and bring unemployment down.
Who controls the issuance of money controls the government!
Ours is a government of checks and balances. The Mafia and crooked businessmen make out checks, and the politicians and other compromised officials improve their bank balances.
The Fed should make a clear commitment to stable money to reduce the swings in interest rates and inflation. Instead, it champions and flaunts unstable money. This encourages momentum trading and the growth of derivatives. Meanwhile, layers of financial regulation make Washington bigger and more powerful but don't fix the underlying problems.
There are a number of institutions globally where the Federal Reserve typically leads the U.S. effort to work with financial regulators from other countries, and we try to, to the extent possible, establish international standards for how - the amount of capital a bank should hold, for example, or how much.
The Federal Reserve has always recognized the importance of allowing markets to work, and government oversight of financial firms will never be fully effective without the aid of strong market discipline.
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