Bernanke may have to curb lending

[OhioChick]

Source: Bloomberg

30 Jul 2009, 0251 hrs IST, Bloomberg

WASHINGTON: The financial-overhaul plan before Congress leaves the Federal Reserve in the business of lending to everyone from General Electric to investors in student loans. That makes it harder for chairman Ben S Bernanke to keep Congress from second-guessing what he does.

Bernanke is trying to deflect a bill, co-sponsored by 276 members of the House of Representatives, that would require audits of central bank operations, including monetary policy decisions, by the Government Accountability Office. Audits wouldn’t be “consistent with independence”, Bernanke said at a Kansas City town hall meeting July 26. “I don’t think the American people want Congress running monetary policy.”

Unless the Fed retreats from unlimited lending, Bernanke can expect such a result, said Marvin Goodfriend, an economist at Carnegie Mellon University in Pittsburgh. The more the Fed invades the domain of Congress by supplying credit to businesses and markets outside the banking system, the more Congress will seek a hand in monetary policy, said Goodfriend, a former adviser to the Richmond Fed.

Central bank independence is incompatible over time with all but limited, temporary last-resort lending to banks, Goodfriend said in an interview. The Fed’s role in emergency lending needs to be clarified before the next crisis, he said.

Congress may demand more say over the Fed’s credit policies. Democratic Representative Paul Kanjorski of Pennsylvania is gathering signatures for a letter asking Bernanke to extend the Term Asset-Backed Securities Loan Facility.




Read more: http://economictimes.indiatimes.com/Bernanke-may-have-to-curb-lending/articleshow/4835976.cms

[KansDem]

1. What's the matter, Ben? "Lending to lenders who won't lend" didn't work out for you?

Who didn't see that coming? :eyes:

[madrchsod]

2. surprise surprise.....ya who did`t see this coming...

[No Elephants]

3. Audits are inconsistent with independence? What crap. Bailouts are inconsistent

with independence. (Or, they would have been, if Congress hadn't rolled over for Paulson and Bernanke.) Laws that protect and benefit banks are inconsistent with independence, too. Or, they would be, if Congress didn't roll over for lobbies.

Once again, banks want to take only the gains and dump the risk and loss on the gubbamint, while waving the tattered, filthy flag of independence. I hope no one buys this.

Curb lending? I thought the whole point of the bailout was to keep loan money flowing. Rather than curbing lending, put the proper conditions on loan money. Our wonderful Congress should have done that with bailout money and stimulus money, but failed us. Lend the money, but condition the loans on putting that money into SOUND business loans and lines of credit and SOUND consumer loans.