Ron Paul Calls For The Federal Reserve To Increase Transparency

By Learned Foote- Talk Radio News Service

Congressman Ron Paul (R-Texas) recently introduced the Federal Reserve Transparency Act to House, a piece of legislation that calls for a stronger audit of the Federal Reserve along with a "detailed report to Congress.” The bill currently has 241 co-sponsors.

During a forum at the Cato Institute, Paul said he originally decided to run for Congress in the 1970s due to his interest in monetary policy, which is conducted by the Federal Reserve. “I’ve been talking about it for decades, and arguing that we had a financial system that was very fryable, very vulnerable, and it was the Fed that was creating the bubbles. Therefore we should be looking into it and preventing these problems rather than waiting for cataclysmic financial crisis to hit.”

Gilbert Schwartz, Former Associate General Counsel to the Federal Reserve, appeared alongside Paul, argued that the Fed is responsible for the financial crisis to some degree, he praised the “flexibility that the Federal Reserve exhibited in terms of their willingness to make sure that the economy—not just the U.S. economy, but also the world financial system—did not collapse.”

Schwartz went on to explain that the Fed understands the growing demand for transparency. He cited recent financial statements released by the Fed, saying, “clearly the message is getting to the Fed, and... this indicates at least some degree of attempt by the Fed to: one, be responsive to that criticism, and number two, probably to thwart the legislation that would otherwise subject them to GAO [U.S. Government Accountability Office] audit.”

Paul said that his bill will “open the books,” but not necessarily affect monetary policy. “It’s less confrontational for those who want to design regulations and deal with with monetary policy, and I think that’s why we’re getting such bipartisan support.” Paul believes, however, that if the audit is conducted, public opinion will turn against the Fed and monetary policy will be substantially challenged.

Ron Paul attributed the bills' support to the changing landscape of the economic system. “It had to do with the TARP funds,” Paul explained. “There are a few spammers out there that are interested in what I’ve been doing, and they’re letting their Congressmen know."

Fed Chairman Bernanke Advises Fiscal Balance To Turn Recession Around

By Annie Berman -- Talk Radio News Service

Federal Reserve Chairman Benjamin Bernanke testified before the House Budget Committee today concerning the current economic recession and warned that the retirement of the baby boomers and an increase in medical and entitlement costs makes it more difficult for the economy to be restored.

In his opening statement, Bernanke said that “Our expectation is that we will begin to see growth in the economy, so, at the end of the technical recession later this year. Underlying that prediction is some stablization in final demand, including consumer spending.”

Though there is hope that we will begin to see our economy turn around, Bernanke stated that unemployment rates will continue to rise into next year.

The American Recovery and Reinvestment Act (ARRA) was enacted by Congress and signed into law by President Obama in February 2009. This act is intended to provide stimulus to the US economy and is worth $787 billion. It includes federal tax relief, unemployment benefits, and domestic spending on education, health care, and energy.

Bernanke said, “by the end of 2010, the stimulus package (ARRA) could boost the level of real GDP between about 1 percent and a little more than 3 percent and the level of employment between roughly 1 million and 3-1/2 million jobs.”

Recently, the credit markets have also taken a downturn, one of the worst since the Great Depression. When Bernanke was asked by the committee how long it would take for additional credit to be made available to consumers and small businesses he said that though this group rely heavily on bank loans, banks have been reluctant to extend credit because they are concerned about their own financial positions.

“We’ve heard complaints that bank examiners from the Fed and other agencies are too prone from preventing banks from making loans, in the interest of safety and soundness... Making loans to credit worthy borrowers, maintaining credit relationships, is profitable, for banks and therefore good for banks,” Bernanke said.

To avoid the another recession as large as this one, Bernanke stated that there needs to be a stronger oversight of large firms, resolution regimes to help resolve failing firms, and to strengthen the financial infrastructure.

Federal Reserve to be more transparent about lending policies

By Kayleigh Harvey - Talk Radio News Service

Federal Reserve Board Chairman, Ben Bernanke testified before the House Financial Services Committee concerning "An Examination of the Extraordinary Efforts by the Federal Reserve Bank to provide Liquidity in the current Financial Crisis."

Chairman Barney Frank, (D-Mass) said in his opening statement: "I read before coming here, the new Treasury of the Secretary's announcement of his plans to use the TARP funds. It is very clear that the Obama administration, as did the Bush administration is using the money in the TARP program in conjunction with the lending authority of the Federal Reserve."

"There are also some important questions in the ways in which we govern ourselves. The Chairman of the Federal Reserve and indeed the Federal Reserve system, I believe were responding to the very real needs in society and people need not agree with every specific decision that the Federal Reserve made, to appreciate the sense of very important public purpose that has motivated them," Chairman Frank said.

The Trouble Assets Relief Program (TARP), was a program set up, in October 2008, by the United States government to allow them to purchase assets and equity from financial institutions to help strengthen them during the economic recession.

The Ranking Member of the Committee, Representative Spencer Bachus, (R-Ala) said: "I believe in a democracy it should be a requirement in any agreement or transaction involving the government that...in the event that our governing officials come to the decision that the commitment of public funds is necessary, if a commitment of taxpayer funds or guarantees cannot be disclosed because of the circumstances involved it cannot and should not be made."

Chairman Bernanke answered questions for over two hours to the Committee concerning the Federal Reserve’s problems in this economic crisis.

"I firmly believe that central banks be as transparent as possible both for reasons of democratic accountability and because many of our policies are likely to be more effective if they are well understood by the markets and the public...The Federal Reserve is committed to keeping the Congress and the public informed about its lending programs and its balance sheet."

"To improve public access to information concerning Federal policies and programs, Federal Reserve staff are developing a new website that will bring together a new systematic and comprehensive way to find a full range of information the Federal Reserve already makes available, supplemented by new explanations, discussions and analysis. Our goal is to have this website operational in a few weeks."

Chairman Bernanke also referred to a new committee that will revue the Federal Reserve’s current publications and disclosure policies that will relate to the Federal Reserve's balance sheet and lending policies.

Bernanke: Second fiscal package would be appropriate

Federal Reserve Chairman Ben Bernanke raised the possibility of a second package of fiscal measures during a House Budget Committee hearing.

Bernanke believes that in the context of a threatened economy it would be appropriate, and suggested steps congress could take to make the package most beneficial.

"Any fiscal package should be well-targeted, in the sense of attempting to maximize the beneficial effects on spending and activity per dollar of increased federal expenditure or lost revenue," said Bernanke.

Bernanke also said that properly timing its release would be a factor so that it would take maximum effect when the economy is expected to be otherwise weak, and that Congress should take care to limit the package's long term effects on the government's structural budget deficit.

"If the Congress proceeds with a fiscal package, it should consider including measures to help improve access to credit consumers, homebuyers, businesses, and other borrowers."

When prompted, Bernanke declined to state how much Congress should allocate for the package, but said that it should be significant.

Bernanke attributes the recent crisis to the erratic housing market, in which the increase in house prices was followed by a steady decline, coupled with a pattern of irresponsible lending practices.

To mitigate the crisis's impact, the Treasury Department and the Federal Reserve, along with foreign governments and their central banks, have expanded currency swap lines with central banks and established temporary programs to aid problems in in the market for commercial paper.

"The Treasury implemented a temporary grantee program for balances in money market mutual funds...the Federal Reserve put in place a temporary lending facility that provides financing for banks to purchase high-quality asset-backed commercial paper for money market funds," said Bernanke.

According to Bernanke, the bailout bill also offered resources to improve the current situation. These include providing capital to financial institutions, purchasing or guaranteeing troubled mortgages, and increasing the limits of how much the Federal Deposit Insurance Corporation and the National Credit Union Administration covers, raising it to a quarter of a million dollars.

Despite the attempts by the Federal Reserve and Treasury Department, it is apparent that the economy will not be mended overnight. Bernanke said that since the low demand for housing continues to be put up against the glut of unsold homes, residential construction is predicted to contract into next year and that the general downturn in international trade will continue to affect the U.S. Still, Bernanke contends that inflation should meet levels consistent with price stability due to the de-acceleration on the prices of imports.

"Because the time that will be needed for financial normalization and the effects of ongoing credit problems on the broader economy are difficult to judge, the uncertainty currently surrounding the economic outlook is unusually large," said Bernanke.

Following the hearing Representative Rosa L. DeLauro (D-Conn.) heatedly asked Bernanke if the U.S. was in a recession.

"I don't think it's a fair question for the following reason. Recession is a technical term that was created by academics for studying a certain pattern," said Bernanke.

Bernanke then went on to clarify his answer by responding,

"We are in a serious slowdown in the economy which has very significant consequences for the public and whether it is called a recession or not is of no consequence."

Today at Talk Radio News

Pentagon Correspondents Dawn Casey and Adrian Frost will attend Defense Secretary Gates's speech at a summit on wounded warriors and amputees. The Washington Bureau will also cover the House Budget
Committee's hearing on "Economic Recovery: Options and Challenges," a summit held by U.S. News and World Report on America's high schools, a news conference by the American National Standards Institute and the Internet Security Alliance on "The Financial Impact of Cyber Risk," a discussion on voter fraud by the Heritage Foundation, and a discussion by the Brookings Institution on "U.S. Democracy Promotion after the Bush Years."