HuffPo: Here’s Why Hillary Clinton’s Federal Reserve Plan Is A Big Deal

[apnu]

Link: http://www.huffingtonpost.com/entry/hillary-clinton-federal-reserve-plan_us_57363ac4e4b08f96c1833ad3?section=politics

Excerpt:

On Thursday, Hillary Clinton endorsed a banking reform idea that is more progressive than anything she backed during her long primary battle with Bernie Sanders. Compared to high-profile proposals like breaking up the banks, the plan Clinton backed is a narrow change, but an important one that nerdy liberal activists have been championing for years. Put simply, Clinton wants to shift the balance of power at the Federal Reserve away from private banks in favor of democratic accountability.

The Fed is the most powerful economic institution in the world, and perhaps the strangest. The central bank’s Board of Governors in Washington, D.C., is a government entity run by presidential appointees who must be confirmed by the Senate. But the 12 regional Federal Reserve Banks that perform the bulk of the central bank’s grunt work — handling and processing reserves — are technically owned by banks. This ownership doesn’t mean much in terms of direct earnings; the banks can’t sell their Fed stock, and the regional Fed banks don’t turn a profit.

The trouble is that the regional Fed banks have a lot of power over the Federal Open Market Committee — the key panel that sets interest rates, directing a tremendous amount of U.S. economic activity. Private banks do have a lot of influence over who manages the Fed’s regional outposts through board of director positions. Directors selected by bankers help choose the president of each Fed outpost. These presidents, in turn, serve on the key committee that sets interest rates. On Thursday, Clinton called for getting bankers out of that process.

If it all sounds terribly complicated, it is. But the bottom line is that Clinton called to replace one form of banker influence over public policy with a system of democratic accountability. That would be a concrete, progressive change to the status quo. And despite her rhetoric on the campaign trail, the key element of Clinton’s financial platform has been to implement existing law.

More at link above.

[AgerolanAmerican]

1. Why would the agent of the banks do this?

If it's not good for the banks - and I confess I have trouble extracting exactly what the proposal is from the article - then why would their favorite politician propose it?

If she's proposing it, there's a back door built in already to make sure the corruption problem doesn't get solved while removing transparency.

[apnu]

2. What is that backdoor?

[AgerolanAmerican]

3. Hard to say

One thing looks clear from the description is that the proposal doesn't actually remove any power from the banks.

"The Federal Reserve is a vital institution for our economy and the wellbeing of our middle class, and the American people should have no doubt that the Fed is serving the public interest,” Jesse Ferguson, a Clinton campaign spokesman, said in a statement.

This is so patently false - the Federal Reserve is quintessentially the primary destroyer of the middle class - that everything else about this immediately becomes suspect.

“That's why Secretary Clinton believes that the Fed needs to be more representative of America as a whole as well as that commonsense reforms -- like getting bankers off the boards of regional Federal Reserve banks -- are long overdue.”

I'm not really sure what putting political appointees instead of bankers in decision-making capacities at banks is intended to do. The appointees will almost certainly be as compromised as the SEC, CFTC, etc. - if they're not simply politically-appointed bankers, as so many key positions are.

I don't see how this proposal helps anyone, except to the extent it provides cover for a false posture of reform.

[BootinUp]

4. Kudos to Hillary. Reduce Private Bank influence at the Fed, Yes!!