this is not a csi episode

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California just made it into the top ten rankings for governments most likely to fail... beating out Iceland. Am I missing out on news of protests and riots? Has the Governator stepped down?

Or are we riveted to CSI: Federal Reserve, starring Alan Grayson, Ben Bernanke, Timothy Geithner, Ron Paul, and featuring the ever-lovable old lefty, Bernie Saunders?

The Federal Reserve keeps its power
By Silla Brush — 05/13/10 06:00 AM ET

Populist lawmakers are failing to convert public outrage at Wall Street into tighter controls on the Federal Reserve.

Despite attracting blame for the financial meltdown and great recession, the central bank is emerging with its powers mostly intact and free of political interference.

Instead of submitting to a chokehold by Congress, the Fed is walking away largely unscathed from fights with lawmakers from the left and right.

As Congress revamps Wall Street regulations, Democrats and Republicans have sharply criticized the Fed and its chairman, Ben Bernanke, for lapses in the run-up to the crisis. They have lashed out at the bank for committing trillions in taxpayer dollars to bail out Wall Street.

In January, Bernanke received the fewest votes in support of his confirmation of any Fed chairman.

But a bipartisan consensus is emerging to protect the Fed’s independence and shore up the private market’s confidence in the central bank.

The Senate approved two amendments this week that are victories for the Fed, and lawmakers are on the way to passing legislation that houses a new consumer protection regulator at the central bank.

“I think there is a broad recognition of the benefits of having an independent central bank,” said Lou Crandall, chief economist at Wrightson ICAP.

Sen. Bernie Sanders (I-Vt.) last week scaled back a popular amendment requiring new audits of the bank, amid warnings from the White House and Fed that it would compromise the independence of the bank and threaten monetary policy.

On Tuesday, the Senate approved, 96-4, the modified amendment, which would require a one-time audit of the central bank’s emergency lending during the crisis but not provide broader audit power of monetary policy. Shortly afterward, senators voted down, 37-62, a much tougher amendment from Sen. David Vitter (R-La.) that mirrored legislation the House passed in December.

The Fed audit issue was a rallying cry for liberal Democrats and conservative Republicans. Rep. Ron Paul (R-Texas), a longtime critic of the bank and author of the recent book End the Fed, is the main supporter of heightened audits. Paul criticized Sanders for modifying the amendment.

Rep. Alan Grayson (D-Fla.), the other main supporter of the House legislation, applauded the Senate for passing the modified amendment.

Grayson said he would push for the stronger version to be included in the final bill, but said the Sanders effort is a “significant step.”

On Wednesday, the Fed won its case for retaining broad supervisory oversight of roughly 5,000 banks. Senate Banking Committee Chairman Chris Dodd (D-Conn.) had pushed for limiting the Fed’s supervision to bank holding companies with at least $50 billion in assets.

Dodd wanted to leave regulation of smaller banks to the Federal Deposit Insurance Corporation (FDIC) and Office of the Comptroller of the Currency (OCC).

The Senate overruled Dodd and approved, 90-9, an amendment sponsored by Sens. Kay Bailey Hutchison (R-Texas) and Amy Klobuchar (D-Minn.) that would retain the Fed’s current power over smaller holding companies and roughly 800 state member banks. Dodd opposed the amendment.

“This is an amendment ensuring the nation’s monetary policy is connected to Main Street,” Klobuchar said on the Senate floor.

Bernanke argued a similar case in congressional testimony.

“We don’t want to just be looking at Wall Street,” Bernanke said in April before the Joint Economic Committee. “We need to look at the whole economy, and not only for monetary policy purposes, but also for financial stability purposes.”

The Fed’s argument was aided by vigorous lobbying from the American Bankers Association (ABA), Independent Community Bankers of America (ICBA) and other financial groups.

“This is of absolutely critical importance to the community banks,” said Bert Ely, a banking analyst. “It’s more than just the Fed.”

After more than a year of wrangling, the Senate is also on the path to setting up a new consumer financial protection regulator housed at the central bank.

The Obama administration and full House both supported the creation of a standalone agency. That idea met stiff resistance in the Senate, even as some Democrats continue to push the proposal.

Instead, Dodd outlined a bill creating a largely independent and autonomous consumer office inside the Fed. Senators had also discussed placing the office at the Treasury Department or FDIC.

Crandall said the votes are evidence of a “deep tradition” of lawmakers recognizing the value of an independent Fed.

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What? Are you buying this?
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THE TIME HAS COME TO STOP BEING POLITE.
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