Rick Perry and Barney Frank Want to Hobble the Fed -- and They're Both Wrong

Last Updated Sep 13, 2011 4:34 PM EDT

What do Rep. Barney Frank, Texas Gov. Rick Perry and Rep. Michele Bachmann all have in common -- other than being mammals? They all have big problems with the Federal Reserve. Bipartisan idiocy!

Perry says Fed chief Ben Bernanke is letting the Fed be used for political purposes. The governor calls Ben's efforts to jumpstart the U.S. economy "almost treasonous."

It is a travesty that young people in America are seeing their dollars devalued in what -- we don't know if it was political or not because of the transparency issue. But I stand by this, that we need to have a Fed that is working towards sound monetary policy, that creates a strong dollar in America, and we do not have that today.
Bachmann is no less fervent in her anger. She says if she gets elected Ben will no longer run the Fed. (Right now, I'm not sure if Bernanke would view that as a threat or a promise.) In her eyes the central bank is practically omnipotent in economic affairs:
Congress has given the Federal Reserve almost unlimited power over the economy. That has to change. They can no longer have that power.
Rounding out this odd squad is Frank, who is a right winger only if you are Vermont Sen. Bernie Sanders, the Socialist Party's lone claim to fame. Barney doesn't think Bernanke is too powerful, though. He thinks the regional Fed presidents are the ones with too much power. He said, "The 7-3 vote of the FOMC in August in favor of keeping interest rates low is stark evidence of how much of a constraint" district Fed presidents are. To his way of thinking a clear 10-0 vote would have done something to ease financial conditions.

So, let's take them from the top.

  1. Gov. Perry, "a strong dollar" is really good as a sound bite. But if you're trying to get people in other nations to buy U.S. goods then you want a weak dollar. That's why the Swiss have been doing everything possible to prevent their currency from getting any stronger.
  2. Rep. Bachmann, I wish you were right. Not that I think the Fed should have all this power -- but if it could do something besides set interest rates and print money then we would all have someone to blame for our troubles.
  3. Barney! The regional Fed presidents are all that's keeping the bank from being entirely in the Beltway Bubble and separated from reality. It wouldn't matter if the vote was 6-4 or 35-0. The reasons financial conditions are what they are is because aggregate demand sucks. Making money cheaper to borrow is very different from giving business a reason to want to borrow it.
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    Constantine von Hoffman is a freelance writer and writing coach. His work has appeared in outlets such as Harvard Business Review, NPR, Sierra magazine, Brandweek, CIO, The Boston Herald, TheStreet.com, CSO, and Boston Magazine.