Congress Is the Drunk at the Fed’s Punch Bowl: Roger Lowenstein
Commentary by Roger Lowenstein
Dec. 7 (Bloomberg) -- The U.S. Congress wants to ride herd over the Federal Reserve. It wants the power to scrutinize the Fed’s interest-rate decisions. It wants to look into how the Fed decides to lend to individual banks.
Like a lot of their constituents, legislators are angry at the Fed’s handling of the financial crisis. They want to know why the Fed permitted such a huge financial bubble to develop -- and why, when it burst, it bailed out so many banks.
Many of the criticisms of the Fed are valid. Former Fed chief Alan Greenspan, who oversaw the economy during the boom years, has admitted he placed too much faith in the ability of bankers to monitor their risks. Ben Bernanke, the current chairman, has been overhauling regulatory policy in the hope of preventing a repeat.
But here’s the thing. The changes that Congress is urging would make things worse. If anything, the Fed has been too sensitive to public opinion. And in the recent past, it was too eager to satisfy the public with an easy-interest-rate and easy- mortgage policy.
Last week, when Bernanke testified before the Senate Banking Committee, which is deliberating whether to confirm him for a second term, senators let him have it. Jim Bunning of Kentucky, more famous for throwing a perfect game in his baseball career than for his central banking expertise, called Bernanke “the definition of a moral hazard.” Bernard Sanders of Vermont, a state with fewer bankers than cows, is vowing to block Bernanke’s reconfirmation.
Bernanke will surely be approved. But the threat to rein in the Fed’s power is serious. The Fed was created as an independent agency precisely so it could make politically unpopular decisions. A Bernie Sanders is unlikely to push for higher interest rates when they are needed. And history shows that political meddling in the Fed has led to serious problems for the nation’s economy.
U.S. gave up billions in tax money in deal for Citigroup's bailout repayment
Deal made to recover bailout Firms exempted from rule when U.S. sells its stake
Citigroup says it has built up $38 billion in losses. With the tax exemption, it will be able to shelter up to $38 billion in future profits. (Richard Drew/associated Press)
By Binyamin AppelbaumWashington Post Staff Writer Wednesday, December 16, 2009
The federal government quietly agreed to forgo billions of dollars in potential tax payments from Citigroup as part of the deal announced this week to wean the company from the massive taxpayer bailout that helped it survive the financial crisis.
- Tax deal is worth billions to Citigroup
- Out from under TARP, banks are now free to fail again
- GM chief promises to repay bailout
The Internal Revenue Service on Friday issued an exception to long-standing tax rules for the benefit of Citigroup and a few other companies partially owned by the government. As a result, Citigroup will be allowed to retain billions of dollars worth of tax breaks that otherwise would decline in value when the government sells its stake to private investors.
While the Obama administration has said taxpayers are likely to profit from the sale of the Citigroup shares, accounting experts said the lost tax revenue could easily outstrip those profits.