The looming challenge, he says, is to reassure markets that the Fed is not going to be "the handmaiden" to fiscal profligacy.
I'll settle for a Fed that simply follows the law.
As I have repeatedly pointed out The Fed is not empowered to purchase instruments that do not carry the full faith and credit of the US Federal Government (except for some very limited exceptions in which maturity does not exceed six months.)
But that's all been forgotten in the name of "expedience". Fannie, Freddie, Bear Stearns, AIG - all have involved The Fed buying debt - not loaning against an obligation in a fully-collateralized fashion, or to use banker's parlance, "discounting a note."
There are all sorts of rumblings coming from China and other parts of the world.
There should be.
Our "regulatory institutions", including the OTS, FDIC and The Fed itself, have been derelict in their duties - at minimum - for years. The OTS has, according to the OIG monitoring it, actually encouraging what amounts to bank fraud in some of the institutions it oversees! The FDIC has ignored "prompt corrective action" to the tune of losing some $50 billion taxpayer dollars over the last year and change, and then The Fed is buying hundreds of billions of Fannie and Freddie paper for which they have no legal authority to acquire, say much less operating three LLCs that they can't legally own.
This sort of lawlessness along with Congressional failure to hold The Fed to account set forth a great example for The Obama Administration when it decided to decree "ex-cathedra" that creditor priority in bankruptcy is no longer the statutory law of The United States.
If one agency can decide on its own initiative that the law is in fact a "polite suggestion" why not two, three or four more?
Finally, we had Obama say this weekend that "we're out of money". Gee, you just figured that out Mr. President?
Did that revelation come to you before or after you put forward a budget proposal that is not only chock-full of the largest handouts in corporate welfare in history (in the form of bailouts) but in addition contains the largest deficits in history - by a factor of about four!
Everyone else has to tighten their belts when the economy goes to hell, but not you Mr.
