<<<-- =DJ CAPITAL VIEWS: Fed-Bashing Redux After Years Of Quiet --
By John Connor
A Dow Jones Newswires Column
WASHINGTON (Dow Jones)--Hard as it may be to remember, events like Ralph
Nader's Fed-bashing conference Monday in Washington were more the norm than the
exception 20 or 30 years or so years ago.
One of the themes advanced at the Nader conference is that the Federal Reserve
is an anomaly in a democratic society, a hugely important operation functioning
with a minimum of openness and accountability. A sub-theme is that those who
should be vigilant over such a powerful body, Congress and the media, have
turned tame and obsequious.
Back in the days of old, when, say, the legendary Wright Patman, D-Tex., held
sway as chairman of the House Banking Committee, railing against the Fed (often
depicted then as the hand-maiden of big banks) seemed to be the order of the
day.
There were agendas for Fed reform by the dozens (much more discussed than
acted upon), hearings and conferences galore where the Fed was pilloried, and
even, occasionally, lawsuits aimed at the Fed.
What came of all that noise is arguable. One centerpiece supposedly was the
Humphrey-Hawkins Act, which led to the Fed reporting to Congress twice a year.
Alas, the "Staff Father" of that law, the late Robert Weintraub, finally quit
attending the H-H hearings, dismissing them as a failed exercise and a waste of
time.
To be sure, people were less fawning toward Fed officialdom going back in
time. Even at the dawn of the Greenspan era, then-Sen. William Proxmire,
D-Wisc., assailed Greenspan, a former private-sector consultant and onetime
Council of Economic Advisers chairman, for having a dreadful record as an
economic forecaster.
Well into the 1980s, to ask then-Rep. Jack Kemp, R-N.Y., a question about what
might be done to make the Fed function better was tantamount to wiping a couple
of hours from your schedule.
Nowadays, even with the economy in the tank, lawmakers spend almost as much
time praising Greenspan as questioning him when he visits Capitol Hill.
According to Nader (whose own career as a consumer advocate/all-purpose gadly
was boosted by admiring journalists), "Greenspan's career has been shielded from
close scrutiny by an adoring cadre of adoring financial journalists and a
Congress which treats the Federal Reserve chairman more as a deity than a public
official."
Alas, the degree of contemporary interest in real old-fashioned Fed-baiting
doesn't appear to be high, Nader's one-day conference notwithstanding.
What happened over the years to take Fed-bashing off the table to a large
degree? Why, as Nader put it, has the Fed "gotten a free pass, time and time
again?"
That, like much else regarding the Fed, is a matter of opinion. One school of
thought is that the considerable moral force and anti-inflation success of Paul
Volcker helped silence the critics; another is that nothing succeeds like
success; still another is that the Fed's critics simply ran out of gas (or hot
air).
More recently, the Clinton Administration's Robert Rubin-orchestrated stance
of not jawboning the Fed and in fact of treating the central bankers like
royalty played a big role into moving the Fed into the realm of the untouchable,
according to Tom Schlesinger, executive director of the Financial Markets
Center.
Others maintain that Congress, with a few notable and vociferous exceptions,
never had much appetite for real Fed "reforms," even when the economy was in the
dumps, because the Fed gave lawmakers one thing politicans of all stripes
cherish - cover.
Proponents of the nothing-succeeds-like-success theory point to the lengthy
economic expansion and huge stock market runup as playing a big role in making
the Fed fire-proof, even after things have gone south.
Still, the possibility that the worm could turn again probably shouldn't be
dismissed out of hand. Author and journalist William Greider, a participant in
the Nader conference, made that point indirectly. He predicted that historians
in 15 or 20 years will look unkindly at the Greenspan era, viewing it much like
the 1920s. >>> |
