The power grab at the Federal Reserve is a topic I first broached
back in February when the Federal Reserve was creating its alphabet
soup of liquidity programs to pull us back from the brink of financial
disaster. I was troubled about Fed policy then and I am still troubled
today.
I am equally disturbed by what is happening in shift in the balance
of power to the executive branch. The Obama Administration seems to be
following in the footsteps of the Bush Administration and making its
own power grab and Congress has only just begun to wake up to this and
start to push back.
At the risk of making this post overly broad, I want to make a few
general comments about how executive power in government operates
before I take on the specifics of the cases at hand. Everyone who has
studied political science is aware that dictators and oligarchies use
crises to invoke fear that allows them to usurp power using the cloak
of ‘national security' as a Trojan horse to consolidate power.
I would argue, this is what has just happened in the U.S. post-9/11
and again after the Panic of 2008. I see these developments undermining
Americans' faith in the political process and I hope an appropriate
restoration of the checks and balances laid out in the Constitution can
be restored. Having made my editorial statement, let me move to the
specifics.
Executive Branch power grab
In September, after Lehman Brothers failed, US Treasury Secretary Hank Paulson asked for and received a blank check
to disburse $700 billion to former colleagues and rivals in the
financial services industry as he and his staff saw fit. In a brilliant
act of cunning, Paulson had gotten approval to do anything he wanted
from a gutless Congress more interested in loading the bill with sweeteners.
This bill was not unlike the Patriot Act, passed after the 9/11
attacks, in that it increased the executive branch's ability to
intervene in the economy as they saw fit. I called it the Economic
Patriot Act.
Originally, the Economic Patriot Act was about marking to market. However, once Gordon Brown started recapitalising Britain, Paulson made an about-face and proceeded to dispense the money in a similar fashion (albeit with much fewer strings attached than in the UK).
When the Obama Administration came to town, the modus operandi were
not much different.
