Today’s press conference by President Barack Obama about the economy, suggests that the White House has lost confidence in the Federal Reserve as an institution whose responsibility it is to recover the US economy in a self-sustaining (meaning, technically Solovian steady-state non-excessive inflationary growth rate at any given interest rate of money supply) and timely manner, especially when the law provides all the authority and the tools to make that happen in the interest of the general welfare of the country.
Presumptive Republican nominee for president in 2012, Mitt Romney, has already called for Ben Bernanke to be replaced.
Republican primary candidate Dr Ron Paul whose responsibility it was to oversee the Federal Reserve in the United States House of Representatives had written a book asking for the Fed to be ended as a separate institutional entity because of its irresponsibility in dispensing fiat money, except under Paul Volcker’s leadership. His clarion call, which provoked protests outside the Fed from his supporters is, in fact, timely – close to 100 years after the institution was founded by president Woodrow Wilson and the Congress in 1913.
The recent financial regulatory reform law requires institutional flesh to be implemented first, though the law itself may need some further changes to be more effective in the world of new finance – innovations meant to circumvent government regulations since the Great Depression in 1929 but flexible in providing capital, one would hope, in a manner that will serve the people’s interests sustainably after the financial crises since 1992 have culminated in the ongoing global economic collapse, engendering serious loss of confidence in open markets and open societies.
The required institutional restructuring will require monetary policy to be merged with the US Treasury after abrogating the Federal Reserve Act and its amendments since 1913 and constrained by legislated rules for maintaining price stability through the implementation of a numerical inflation targeting range to ensure monetary policy independence within the executive branch in a manner that is accountable to the Congress and the people, similar to other executive branch agencies.
An Undersecretary of Monetary Affairs reporting to the Secretary of Treasury of the United States should be held accountable for monetary policy after the institutional reform.
The reconstituted Treasury Department will be responsible only for monetary and fiscal policies, accountability to the Congress and the people held in the Undersecretaries of Monetary and Fiscal policies reporting to the Secretary of the Treasury who in turn reports to the president of the United States, and all of whom can be called upon by the United States Congress and the people at any time of their choosing to explain the economic health of the country.
International Economic Policy must be moved to the Department of State from the Department of The Treasury to work with other nations on the boards of the International Monetary Fund (IMF) and The World Bank.
Financial markets supervision and markets’ regulation by the Securities and Exchange Commission (SEC), the Commodities and Futures Trading Commission (CFTC) and any other regulatory agency pertaining to the financial markets such as the Federal Deposit Insurance Corporation (FDIC), Office of Comptroller of Currency (OCC) and others for all financial instruments must be consolidated with consumer protection as a separate executive branch agency.