Tuesday, July 15, 2008
Senator Jim Bunning (R-Kentucky) joins Ron Paul (R-Texas) as one of the few elected officials who understand one of the major reasons that financial markets and the economy are in the condition they are in today - the Federal Reserve.
In prepared remarks made earlier today as part the Senate Banking Committee hearing (hat tip hardwinterwheat) , Sen. Bunning made the following comments:
I'm deeply concerned about what the Fed has done in the last year and in the last decade. Chairman Greenspan's easy money in the late 90s and then following the tech bust inflated the housing bubble and created the mess we are in today. Chairman Bernanke's easy money in the last year has undermined the dollar and sent oil to a new high every day and an almost doubling since the rate cuts started.Yes, this is one of the more important "Greenspan mess" sightings.
The Fed is asking for more power but the Fed has proven that they can not be trusted with the power they have. They get it wrong, do not use it, or stretch it farther than it was supposed to go in the first place. As I said a moment ago, their monetary policy is the leading cause of the mess we are in. As regulators, it took until yesterday to use the power we gave them in 1994 to regulate all mortgage lenders and then they stretched their authority by buying $29 billion worth of Bear Stearns assets so J.P. Morgan could buy Bear Stearns at a deep discount.
Now the Fed wants to be a systemic risk regulator, but the Fed is a systemic risk. Giving the Fed more power is like giving a neighborhood kid who broke a window playing baseball on the street a bigger bat and thinking that will fix the problem.