Why are conservatives obsessed with the federal reserve?

[Axulus]

Committee Chairman Jeb Hensarling (R., Texas) said in his opening statement, “Fed reforms are needed and I for one believe Fed reforms are coming.”

One bill introduced by Sen. Rand Paul (R., Ky.) would allow the Government Accountability Office to review the Fed’s monetary-policy decision making. Mr. Paul says the measure would improve central-bank transparency.

Ms. Yellen said she opposed the bill because it would impair the Fed’s ability to set interest rates independent of political influence.

Republicans at the hearing countered that Ms. Yellen’s calendars show the executive branch has far more access, and potentially more influence, than Congress.

Between February and December last year, Ms. Yellen held 23 meetings—including telephone calls and in-person sessions—with lawmakers, including 16 with Democrats and seven with Republicans, her calendar shows. She held 51 meetings with executive branch officials, including two with President Barack Obama and 25 with Treasury Secretary Jacob Lew .

Rep. Scott Garrett (R., N.J.), citing a Wall Street Journal online tool that allows readers to sort Ms. Yellen’s calendar for meetings with different officials by name and type, said her schedule was among many factors painting a picture of a Fed “guided by partisan politics.” Others included her speech on inequality in October a month before the midterm elections; her meeting with Mr. Obama the day before the elections; and her meeting with “liberal advocacy groups.”

“So having Congress oversee your agency more thoroughly will not make it more political than it already is,” Mr. Garrett said.

Rep. Bill Huizenga (R., Mich.), referring to the White House address, said, “I don’t want to see 1600 Pennsylvania Ave. policies pushed through the Fed.” He asked, “is [the Fed] being unduly influenced by the executive branch?”

Ms. Yellen said no.

http://www.wsj.com/articles/fed-chief-janet-yellen-defends-fed-independence-1424883047

This lack of independence of the Fed sounds all like rumor and innuendo, and the proposed "cure" (partisan audits and other interference into the central bank affairs) is worse than the claimed disease.

What specific actions undertaken by the federal reserve can these Republicans point to that indicate partisan bias?

By all accounts, the federal reserve has done a fair job managing the financial crisis and implementing accommodative policy that helped dig us out of the great recession.

 

[tupac chopra]

By all accounts, the federal reserve has done a fair job managing the financial crisis and implementing accommodative policy that helped dig us out of the great recession.

The experiment isn't over yet. As Warren Buffet (who is obviously a fan) said, 'they will find it's a lot harder to sell securities than it is to buy them."

 

[Sarpedon]

Because money is literally all conservatives care about, and the Federal Reserve controls the money supply. This is like holding a big side of beef, and being surprised that dogs won't stop staring at you.

 

[Tom Sawyer]

Because money is literally all conservatives care about, and the Federal Reserve controls the money supply. This is like holding a big side of beef, and being surprised that dogs won't stop staring at you.

The dogs can mind their own damn business. That's my fucking beef.

 

[arkirk]

Committee Chairman Jeb Hensarling (R., Texas) said in his opening statement, “Fed reforms are needed and I for one believe Fed reforms are coming.”

One bill introduced by Sen. Rand Paul (R., Ky.) would allow the Government Accountability Office to review the Fed’s monetary-policy decision making. Mr. Paul says the measure would improve central-bank transparency.

Ms. Yellen said she opposed the bill because it would impair the Fed’s ability to set interest rates independent of political influence.

Republicans at the hearing countered that Ms. Yellen’s calendars show the executive branch has far more access, and potentially more influence, than Congress.

Between February and December last year, Ms. Yellen held 23 meetings—including telephone calls and in-person sessions—with lawmakers, including 16 with Democrats and seven with Republicans, her calendar shows. She held 51 meetings with executive branch officials, including two with President Barack Obama and 25 with Treasury Secretary Jacob Lew .

Rep. Scott Garrett (R., N.J.), citing a Wall Street Journal online tool that allows readers to sort Ms. Yellen’s calendar for meetings with different officials by name and type, said her schedule was among many factors painting a picture of a Fed “guided by partisan politics.” Others included her speech on inequality in October a month before the midterm elections; her meeting with Mr. Obama the day before the elections; and her meeting with “liberal advocacy groups.”

“So having Congress oversee your agency more thoroughly will not make it more political than it already is,” Mr. Garrett said.

Rep. Bill Huizenga (R., Mich.), referring to the White House address, said, “I don’t want to see 1600 Pennsylvania Ave. policies pushed through the Fed.” He asked, “is [the Fed] being unduly influenced by the executive branch?”

Ms. Yellen said no.

http://www.wsj.com/articles/fed-chief-janet-yellen-defends-fed-independence-1424883047

This lack of independence of the Fed sounds all like rumor and innuendo, and the proposed "cure" (partisan audits and other interference into the central bank affairs).

What specific actions undertaken by the federal reserve can these Republicans point to that indicate partisan bias?

By all accounts, the federal reserve has done a fair job managing the financial crisis and implementing accommodative policy that helped dig us out of the great recession.

Fed actions such as QE have empowered the big banks to control our economy. By bailing them out, the Fed makes them the gatekeepers of our economy and entrenches them in activities that are harmful to our economy. The injection point for the funds the Fed creates should never be the big banks. They have chosen to operate on that money and not serve savers and pensioners and pension plans and the money of the common man. This is evidenced by the largest banks only offering 0.1% on savings. A person who worked his or her lifetime in an inflationary economy and has saved considerable funds is still cash poor if he cannot work anymore. That is likely because our physical economy is actually quite anemic. The focus of these banks is still on large returns to their share holders to such an extent they mainly seek speculative gains and they do not finance small business at all.

By issuing this money to big banks at zero or next to zero interest, the Fed becomes their stooge and slave. This also makes the banks have no interest in the saver. We should abolish the Fed entirely and establish a National Bank with strict government controls on whom they might issue money to. The Fed is unduly influenced by the same crooked too big to fail banking interests that caused the 2008 economic crisis. What's worse, these banks are steering their way back to the same policies that caused that crisis.

You use the word "Liberal" far too liberally. Obama et al. are corporatists...much like you. That is not very "liberal" if you ask me.

 

[Axulus]

By all accounts, the federal reserve has done a fair job managing the financial crisis and implementing accommodative policy that helped dig us out of the great recession.

The experiment isn't over yet. As Warren Buffet (who is obviously a fan) said, 'they will find it's a lot harder to sell securities than it is to buy them."

Why would it be harder to sell the securities? There is a lot of demand for low risk fixed income securities.

The Fed has a dual mandate - price stability and full employment. If we see runaway inflation (let's say inflation above the 4% mark for a given year, or above 3% for more than a few years), I'll agree that they are failing in their mandate and may be evidence of a lack of independence. So far, I'm not seeing it.

 

[Axulus]

http://www.wsj.com/articles/fed-chief-janet-yellen-defends-fed-independence-1424883047

This lack of independence of the Fed sounds all like rumor and innuendo, and the proposed "cure" (partisan audits and other interference into the central bank affairs).

What specific actions undertaken by the federal reserve can these Republicans point to that indicate partisan bias?

By all accounts, the federal reserve has done a fair job managing the financial crisis and implementing accommodative policy that helped dig us out of the great recession.

Fed actions such as QE have empowered the big banks to control our economy. By bailing them out, the Fed makes them the gatekeepers of our economy and entrenches them in activities that are harmful to our economy. The injection point for the funds the Fed creates should never be the big banks. They have chosen to operate on that money and not serve savers and pensioners and pension plans and the money of the common man. This is evidenced by the largest banks only offering 0.1% on savings. A person who worked his or her lifetime in an inflationary economy and has saved considerable funds is still cash poor if he cannot work anymore. That is likely because our physical economy is actually quite anemic. The focus of these banks is still on large returns to their share holders to such an extent they mainly seek speculative gains and they do not finance small business at all.

By issuing this money to big banks at zero or next to zero interest, the Fed becomes their stooge and slave. This also makes the banks have no interest in the saver. We should abolish the Fed entirely and establish a National Bank with strict government controls on whom they might issue money to. The Fed is unduly influenced by the same crooked too big to fail banking interests that caused the 2008 economic crisis. What's worse, these banks are steering their way back to the same policies that caused that crisis.

You use the word "Liberal" far too liberally. Obama et al. are corporatists...much like you. That is not very "liberal" if you ask me.

You don't seem to understand how QE works - it is not a bailout. It is not a loan. The federal reserve doesn't engage in bailouts. The bailout was TARP, which was conducted through an act of _congress_.

QE consisted of purchases of financial _assets_ owned by banks in exchange for cash. In other words, it's a trade. Furthermore, those who own retirement accounts would be beneficiaries of such an action as it would raise the value of their portfolio.

The purpose of this is to increase liquidity and money supply and bring down yields to help stimulate the economy.

Your proposal is exactly the type of thing that gets rid of central bank independence and ruins economies.

 

[Horatio Parker]

Fed actions such as QE have empowered the big banks to control our economy. By bailing them out, the Fed makes them the gatekeepers of our economy and entrenches them in activities that are harmful to our economy. The injection point for the funds the Fed creates should never be the big banks. They have chosen to operate on that money and not serve savers and pensioners and pension plans and the money of the common man. This is evidenced by the largest banks only offering 0.1% on savings. A person who worked his or her lifetime in an inflationary economy and has saved considerable funds is still cash poor if he cannot work anymore. That is likely because our physical economy is actually quite anemic. The focus of these banks is still on large returns to their share holders to such an extent they mainly seek speculative gains and they do not finance small business at all.

By issuing this money to big banks at zero or next to zero interest, the Fed becomes their stooge and slave. This also makes the banks have no interest in the saver. We should abolish the Fed entirely and establish a National Bank with strict government controls on whom they might issue money to. The Fed is unduly influenced by the same crooked too big to fail banking interests that caused the 2008 economic crisis. What's worse, these banks are steering their way back to the same policies that caused that crisis.

You use the word "Liberal" far too liberally. Obama et al. are corporatists...much like you. That is not very "liberal" if you ask me.

You don't seem to understand how QE works - it is not a bailout. It is not a loan. The federal reserve doesn't engage in bailouts. The bailout was TARP, which was conducted through an act of _congress_.

QE consisted of purchases of financial _assets_ owned by banks in exchange for cash. In other words, it's a trade. Furthermore, those who own retirement accounts would be beneficiaries of such an action as it would raise the value of their portfolio.

The purpose of this is to increase liquidity and money supply and bring down yields to help stimulate the economy.

Your proposal is exactly the type of thing that gets rid of central bank independence and ruins economies.

A trade of cash for securities of questionable value. A rose by any other name etc.

 

[arkirk]

Fed actions such as QE have empowered the big banks to control our economy. By bailing them out, the Fed makes them the gatekeepers of our economy and entrenches them in activities that are harmful to our economy. The injection point for the funds the Fed creates should never be the big banks. They have chosen to operate on that money and not serve savers and pensioners and pension plans and the money of the common man. This is evidenced by the largest banks only offering 0.1% on savings. A person who worked his or her lifetime in an inflationary economy and has saved considerable funds is still cash poor if he cannot work anymore. That is likely because our physical economy is actually quite anemic. The focus of these banks is still on large returns to their share holders to such an extent they mainly seek speculative gains and they do not finance small business at all.

By issuing this money to big banks at zero or next to zero interest, the Fed becomes their stooge and slave. This also makes the banks have no interest in the saver. We should abolish the Fed entirely and establish a National Bank with strict government controls on whom they might issue money to. The Fed is unduly influenced by the same crooked too big to fail banking interests that caused the 2008 economic crisis. What's worse, these banks are steering their way back to the same policies that caused that crisis.

You use the word "Liberal" far too liberally. Obama et al. are corporatists...much like you. That is not very "liberal" if you ask me.

You don't seem to understand how QE works - it is not a bailout. It is not a loan. The federal reserve doesn't engage in bailouts. The bailout was TARP, which was conducted through an act of _congress_.

QE consisted of purchases of financial _assets_ owned by banks in exchange for cash. In other words, it's a trade. Furthermore, those who own retirement accounts would be beneficiaries of such an action as it would raise the value of their portfolio.

The purpose of this is to increase liquidity and money supply and bring down yields to help stimulate the economy.

Your proposal is exactly the type of thing that gets rid of central bank independence and ruins economies.

And what do they do with these "financial assets?" I remember TARP was about "troubled assets." Do they collect revenue on these "assets?" No! They are just MAKING MONEY and buying junk with it. This FED is just a bunch of big bankers anyway. It's money is fiat money anyway...it's just that the fucking fiat always falls on the vulnerable, the workers, and never retires the debts of common people. You're blowing smoke here, using words that actually have no concrete meaning...or worse, only have meaning to the 1%.

 

[dismal]

QE consisted of purchases of financial _assets_ owned by banks in exchange for cash. In other words, it's a trade.

If I have a bunch of illiquid sucky loans that I can't sell in the open market for face value and they are threatening my solvency and then the Fed comes along and buys them at face value that's a bailout.

 

[Axulus]

You don't seem to understand how QE works - it is not a bailout. It is not a loan. The federal reserve doesn't engage in bailouts. The bailout was TARP, which was conducted through an act of _congress_.

QE consisted of purchases of financial _assets_ owned by banks in exchange for cash. In other words, it's a trade. Furthermore, those who own retirement accounts would be beneficiaries of such an action as it would raise the value of their portfolio.

The purpose of this is to increase liquidity and money supply and bring down yields to help stimulate the economy.

Your proposal is exactly the type of thing that gets rid of central bank independence and ruins economies.

A trade of cash for securities of questionable value. A rose by any other name etc.

They only purchased government securities or those guaranteed by the government (such as securities issued by Fannie Mae and Freddie Mac).

http://www.federalreserve.gov/faqs/what-are-the-federal-reserves-large-scale-asset-purchases.htm

- - - Updated - - -

QE consisted of purchases of financial _assets_ owned by banks in exchange for cash. In other words, it's a trade.

If I have a bunch of illiquid sucky loans that I can't sell in the open market for face value and they are threatening my solvency and then the Fed comes along and buys them at face value that's a bailout.

They were either issued by the government or guaranteed by the government. How sucky can they be? Where is your evidence that these ones in particular were illiquid? They were _not_ bought for face value:

The Fed purchased the securities in the private market through a competitive process;

http://www.federalreserve.gov/faqs/what-are-the-federal-reserves-large-scale-asset-purchases.htm

 

[Axulus]

You don't seem to understand how QE works - it is not a bailout. It is not a loan. The federal reserve doesn't engage in bailouts. The bailout was TARP, which was conducted through an act of _congress_.

QE consisted of purchases of financial _assets_ owned by banks in exchange for cash. In other words, it's a trade. Furthermore, those who own retirement accounts would be beneficiaries of such an action as it would raise the value of their portfolio.

The purpose of this is to increase liquidity and money supply and bring down yields to help stimulate the economy.

Your proposal is exactly the type of thing that gets rid of central bank independence and ruins economies.

And what do they do with these "financial assets?" I remember TARP was about "troubled assets." Do they collect revenue on these "assets?" No! They are just MAKING MONEY and buying junk with it. This FED is just a bunch of big bankers anyway. It's money is fiat money anyway...it's just that the fucking fiat always falls on the vulnerable, the workers, and never retires the debts of common people. You're blowing smoke here, using words that actually have no concrete meaning...or worse, only have meaning to the 1%.

The assets that the federal reserve purchased were _not_ the troubled ones. What they do with the financial assets is collect the payments on them, use the profits to pay their expenses, and remit the excess to the US treasury.

The federal reserve does not retire any debts. These are _assets_ held by the bank - loans receivable the bank, that are then made due to the federal reserve once purchased.

 

[dismal]

A trade of cash for securities of questionable value. A rose by any other name etc.

They only purchased government securities or those guaranteed by the government (such as securities issued by Fannie Mae and Freddie Mac).

http://www.federalreserve.gov/faqs/what-are-the-federal-reserves-large-scale-asset-purchases.htm

- - - Updated - - -

QE consisted of purchases of financial _assets_ owned by banks in exchange for cash. In other words, it's a trade.

If I have a bunch of illiquid sucky loans that I can't sell in the open market for face value and they are threatening my solvency and then the Fed comes along and buys them at face value that's a bailout.

They were either issued by the government or guaranteed by the government. How sucky can they be? Where is your evidence that these ones in particular were illiquid? They were _not_ bought for face value:

The Fed purchased the securities in the private market through a competitive process;

http://www.federalreserve.gov/faqs/what-are-the-federal-reserves-large-scale-asset-purchases.htm

You're attempting to argue that when the government was buying mortgage debt in a financial crisis trigged too much crappy mortgage debt that the mortgage debt it bought was not crappy?

 

[Axulus]

They only purchased government securities or those guaranteed by the government (such as securities issued by Fannie Mae and Freddie Mac).

http://www.federalreserve.gov/faqs/what-are-the-federal-reserves-large-scale-asset-purchases.htm

- - - Updated - - -

QE consisted of purchases of financial _assets_ owned by banks in exchange for cash. In other words, it's a trade.

If I have a bunch of illiquid sucky loans that I can't sell in the open market for face value and they are threatening my solvency and then the Fed comes along and buys them at face value that's a bailout.

They were either issued by the government or guaranteed by the government. How sucky can they be? Where is your evidence that these ones in particular were illiquid? They were _not_ bought for face value:

The Fed purchased the securities in the private market through a competitive process;

http://www.federalreserve.gov/faqs/what-are-the-federal-reserves-large-scale-asset-purchases.htm

You're attempting to argue that when the government was buying mortgage debt in a financial crisis trigged too much crappy mortgage debt that the mortgage debt it bought was not crappy?

I don't understand what you are saying. What I am saying is that it bought only the high quality mortgage debt and other government backed or guaranteed securities, and it was purchased in the private market at market prices (obviously influenced by the federal reserve purchases) and not face value like you claimed.

 

[dismal]

They only purchased government securities or those guaranteed by the government (such as securities issued by Fannie Mae and Freddie Mac).

http://www.federalreserve.gov/faqs/what-are-the-federal-reserves-large-scale-asset-purchases.htm

- - - Updated - - -

QE consisted of purchases of financial _assets_ owned by banks in exchange for cash. In other words, it's a trade.

If I have a bunch of illiquid sucky loans that I can't sell in the open market for face value and they are threatening my solvency and then the Fed comes along and buys them at face value that's a bailout.

They were either issued by the government or guaranteed by the government. How sucky can they be? Where is your evidence that these ones in particular were illiquid? They were _not_ bought for face value:

The Fed purchased the securities in the private market through a competitive process;

http://www.federalreserve.gov/faqs/what-are-the-federal-reserves-large-scale-asset-purchases.htm

You're attempting to argue that when the government was buying mortgage debt in a financial crisis trigged too much crappy mortgage debt that the mortgage debt it bought was not crappy?

I don't understand what you are saying. What I am saying is that it bought only the high quality mortgage debt and other government backed or guaranteed securities, and it was purchased in the private market at market prices (obviously influenced by the federal reserve purchases) and not face value like you claimed.

I think perhaps the part you forgot is that FHLMC, FNMA, and GNMA were essentially quasi independent insolvent entities with pantloads of bad debt before the government nationalized them. Then, once the government effective swallowed their losses it used them to bundle up mortgages from banks which it had the fed choke down.

http://en.wikipedia.org/wiki/Federal_takeover_of_Fannie_Mae_and_Freddie_Mac

Why do you imagine they were buying up mortgage bonds in a mortgage crisis?

 

[Axulus]

They only purchased government securities or those guaranteed by the government (such as securities issued by Fannie Mae and Freddie Mac).

http://www.federalreserve.gov/faqs/what-are-the-federal-reserves-large-scale-asset-purchases.htm

- - - Updated - - -

QE consisted of purchases of financial _assets_ owned by banks in exchange for cash. In other words, it's a trade.

If I have a bunch of illiquid sucky loans that I can't sell in the open market for face value and they are threatening my solvency and then the Fed comes along and buys them at face value that's a bailout.

They were either issued by the government or guaranteed by the government. How sucky can they be? Where is your evidence that these ones in particular were illiquid? They were _not_ bought for face value:

The Fed purchased the securities in the private market through a competitive process;

http://www.federalreserve.gov/faqs/what-are-the-federal-reserves-large-scale-asset-purchases.htm

You're attempting to argue that when the government was buying mortgage debt in a financial crisis trigged too much crappy mortgage debt that the mortgage debt it bought was not crappy?

I don't understand what you are saying. What I am saying is that it bought only the high quality mortgage debt and other government backed or guaranteed securities, and it was purchased in the private market at market prices (obviously influenced by the federal reserve purchases) and not face value like you claimed.

I think perhaps the part you forgot is that FHLMC, FNMA, and GNMA were essentially quasi independent insolvent entities with pantloads of bad debt before the government nationalized them. Then, once the government effective swallowed their losses it used them to bundle up mortgages from banks which it had the fed choke down.

http://en.wikipedia.org/wiki/Federal_takeover_of_Fannie_Mae_and_Freddie_Mac

Why do you imagine they were buying up mortgage bonds in a mortgage crisis?

They were buying up mortgage bonds because (1) there is a large supply of them, (2) they were issued by government backed agencies. The federal reserve did not buy up bad debt. They have made a lot of profit off of the MBS they purchased and remitted those profits to the treasury.

 

[Horatio Parker]

They only purchased government securities or those guaranteed by the government (such as securities issued by Fannie Mae and Freddie Mac).

http://www.federalreserve.gov/faqs/what-are-the-federal-reserves-large-scale-asset-purchases.htm

- - - Updated - - -

QE consisted of purchases of financial _assets_ owned by banks in exchange for cash. In other words, it's a trade.

If I have a bunch of illiquid sucky loans that I can't sell in the open market for face value and they are threatening my solvency and then the Fed comes along and buys them at face value that's a bailout.

They were either issued by the government or guaranteed by the government. How sucky can they be? Where is your evidence that these ones in particular were illiquid? They were _not_ bought for face value:

The Fed purchased the securities in the private market through a competitive process;

http://www.federalreserve.gov/faqs/what-are-the-federal-reserves-large-scale-asset-purchases.htm

You're attempting to argue that when the government was buying mortgage debt in a financial crisis trigged too much crappy mortgage debt that the mortgage debt it bought was not crappy?

I don't understand what you are saying. What I am saying is that it bought only the high quality mortgage debt and other government backed or guaranteed securities, and it was purchased in the private market at market prices (obviously influenced by the federal reserve purchases) and not face value like you claimed.

There was no market. That's why the fed stepped in. Allowing the securities to unwind in the private sector was a sure meltdown. The point was to inject liquidity into the system to prevent the credit markets from freezing. It was an emergency measure, not a shrewd investing maneuver.

 

[laughing dog]

To answer the OP, IMO, there are two reasons:
1) many conservatives are simply economically ignorant, and
2) some conservatives view the fed as interfering with financial markets.

 

[dismal]

They were buying up mortgage bonds because (1) there is a large supply of them, (2) they were issued by government backed agencies. The federal reserve did not buy up bad debt. They have made a lot of profit off of the MBS they purchased and remitted those profits to the treasury.

I guess you didn't read the link I provided?

FNMA and FHLMC were privately owned at the start of the financial crisis. The government was under no legal obligation to bail them out, though many people assumed they would.

In 2008 the government effectively nationalized FNMA and FHLMC and bailed out the people that held their debt -- much of which was held by financial institutions. It did this in two ways. Money from treasury was directly injected into FNMA and FHLMC. Money from the Fed was used to buy up large quantities of their debt, getting it off the books of those holding the troubled loans. Then the Fed continued to purchase billions of dollars of FNMA and FHLMC mortgage backed securities in order to "keep the mortgage market liquid". A Mortgage Backed Security, I assume you know, is bundle of mortgages that FHMLC or FNMA has acquired from a bank, thrown in to a package with a FHLMC or FNMA guarantee on top, and sold as a bond. The Fed buying up billions of dollars worth of these is an activity is clearly designed to create artificial (as in the market would have required more return to do it) liquidity in the mortgage market for issuing banks.

The idea that this was not a bailout for the mortgage sector is roughly akin to arguing that if the Fed had agreed to buy $1 billion worth of cars a month it is just buying assets, not a bailout to the auto sector. The Fed does not buy assets from a particular sector just to buy assets. When it wants to engage in "Open Market Operations" US treasuries are available and the historically proper tool.

 

[Loren Pechtel]

To answer the OP, IMO, there are two reasons:
1) many conservatives are simply economically ignorant, and
2) some conservatives view the fed as interfering with financial markets.

And

3) The Fed doesn't agree with the Republican borrow-and-spend approach.

4) The Fed stops them from manipulating the economy for political reasons.