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Deception and Abuse at the Fed

Bloomberg's  Caroline Baum reviews the book Deception and Abuse at the Fed:

"Until the U.S. Federal Reserve took the unprecedented step of financing the purchase of Bear Stearns Cos. by JPMorgan Chase & Co. in March, criticism of the central bank was largely confined to its conduct of monetary policy.

The institution itself usually got a pass. Lone voices that dared to knock the Fed were drowned out by its supporters in the financial community -- the very bankers the Fed regulates.

One of those lone voices, U.S. Representative Henry Gonzalez, came from the Lone Star State. Neither the power of the Fed nor the near-mythic status of its longtime chairman, Alan Greenspan, deterred the late Texas populist.

As chairman of the House Banking Committee from 1989 to 1994, he relentlessly pressed for public scrutiny of what he called a secretive agency wielding enormous power, writes Robert D. Auerbach in his convincing first-hand chronicle of Gonzalez's battle, "Deception and Abuse at the Fed."

Auerbach details how the Federal Reserve is "the most powerful peacetime bureaucracy in the federal government." While most of congress and Wall Street  were lauding the "genius" of the Maestro -- FOMC chair Alan Greenspan -- few seemed to notice that Fed operated with almost no public accountability. The singular exception: Henry B. Gonzalez (D-TX)—chairman of the U.S. House of Representatives Financial Services (banking) Committee.

The author documents what he terms abuses at the Fed:

•  Blocking Congress and the public from holding powerful Fed officials accountable by falsely declaring—for 17 years—it had no transcripts of its meetings;

• Manipulating the stock and bond markets in 1994 under cover of a preemptive strike against inflation;

• Allowing $5.5 billion to be sent to Saddam Hussein from a small Atlanta branch of a foreign bank—the result of faulty bank examination practices by the Fed;

• Stonewalling Congressional investigations and misleading the Washington Post about the $6,300 found on the Watergate burglars.

I haven't read this yet, but it certainly looks interesting . . .

>

Sources:

Book:
Deception and Abuse at the Fed: Henry B. Gonzalez Battles Alan Greenspan's Bank
Robert D. Auerbach
June 2008

Greenspan, `Master of Garblements,' Fares Poorly in Book on Fed
Caroline Baum
Bloomberg, June 5 2008
http://www.bloomberg.com/apps/news?pid=20601088&sid=azJ3IDPrjLiE&

Thursday, June 05, 2008 | 09:00 PM | Permalink | Comments (12) | TrackBack (0)
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Comments

I saw this column as well and posted a similar comment on my blog. What I think would be interesting is to see a contrast in how he views Volcker versus Greenspan, since all the Fed chairmen were criticized according to the article.

Posted by: Ed H | Jun 5, 2008 9:37:45 PM