The weird relationship between 'Audit the Fed' and breaking up the banks
As the FinReg process has pushed forward, controversy has centered around two amendments: Bernie Sanders's proposal to audit the Federal Reserve and a proposal by Sherrod Brown (pictured) and Ted Kaufman to break up large banks. Grouping the two of these together has been a little bit weird; one transforms Wall Street while the other directs a government agency to keep us abreast of what they're doing with our money.
But the Federal Reserve has fought the effort for transparency as if it were an effort to break them apart. Ben Bernanke's letter on the subject sounds alarmed, to say the least. But because the Fed was never able to make a very good case that their new powers shouldn't result in somewhat more transparency, they've lost. Now, a modified version of Sanders's amendment seems sure to pass.
Conversely, the Brown-Kaufman proposal to break up the banks failed last night, 61 to 33. In some way, I'd say you're seeing the fundamentals of these policies assert themselves. Audit the Fed is not a radical bill and it's actually a bit hard to argue against it. Breaking up the banks makes a fair amount of sense, but it's substantively a lot more radical than anything else in the legislation.
Photo credit: Richard A. Lipski -- The Washington Post.
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