The Fed's New Rulez (Scary!)

Sorry in advance, this is kind of a long one!



Recently, the US Treasury Department proposed a new plan to give the Federal Reserve "Wide New Power," according to a March 29, 2008 article at NYTimes.com (capped above and available here: http://snurl.com/2680x ). Here's a cutting from the article itself:



"The Treasury Department will propose on Monday that Congress give the Federal Reserve broad new authority to oversee financial market stability, in effect allowing it to send SWAT teams into any corner of the industry or any institution that might pose a risk to the overall system."



This was enough to give me the chills. There's this thing that many people believe was the real reason the Civil War happened. Most people think it was because of slavery--many believe that it wasn't. The core issue was the federal government telling the states what to do--this is aka "states rights". What we're seeing here, assuming the new rules are implemented, is a financial equivalent of this.



The Federal Reserve, a semi-governmental body that loans money to the Treasury Department to be then printed as currency, would have the ability to tell banks what to do. While the NYTtimes article cited above goes on to talk about a bunch of things the Fed wouldn't be able to do, the usage of the phrase "SWAT teams" in the opening sentence of the article does suggest a lack of a bank's ability to make decisions for itself.



So, it seems to me that we as individuals are having our freedoms infringed upon and so are the banks. We're all beholden to the ultimate power-combo of the US Government and the Federal Reserve.



The semi-good news here is that banks are fighting back, according to an April 28, 2008 New York times article I found at HeraldTribune.com (get it here: http://snurl.com/2681u ), anyway. The reason this is only "semi" good news is because of how the argument is being couched:



"As the Federal Reserve completes work on rules designed to root out abuses by lenders, the plan has run into a buzz saw of criticism from bankers, mortgage brokers and other parts of the housing industry. One common industry criticism is that, at a time of tight credit, the rules could make many mortgages more expensive by creating more paperwork and potentially exposing lenders to more lawsuits.



To the chagrin of consumer groups, which have complained that the proposed rules are not strong enough, the industry criticism has prompted the Fed to consider whether to narrow the scope of the plan so that it applies to fewer loans."



So, it's either a "more regulation" issue or a "not-so-much regulation" issue. I think the problem is more about the system, itself. It's like the shark--if our financial system stops swimming, it will die. To be more specific, if our financial system stops *growing* it will die (apparently).



That's a pretty messed up system right there. Do you really think a system like that is safe? Or stable? Or the best option? What happens if it fails? Do we need to see a Greater Depression?



Shouldn't we have a system that doesn't put every last bit of emphasis on making money? Shouldn't we have a currency that actually represents something physical? I think our dollar represents a fraction of an hour's worth of work--not gold, silver or platinum. As a result, our entire economy is based on our labor--our labor.



If employment goes down or the value of the dollar goes down, who suffers first? The poorest. Then the not-so-poor and so on, up the ladder, until the rich barely feel it.



What's worse is that inflation just keeps growing and growing and growing and no one seems to think there's anything wrong with a currency that is designed to be worth less with every year that passes.



I'm no financial expert. I can't suggest any solutions. All I can do is point out what seems to be happening and how our government has bet all our money on this one system expecting it to never fail *ever*.



Or maybe they knew it would fail but didn't care?

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