By MICHAEL GRAY
The Barrack Obama administration is planning to give Federal Reserve chief Ben Bernanke regulatory oversight over the banking system and systemic risk.
• The Fed is not a federal agency!
• The Fed is owned by the banks, which it will be charged with regulating!
• The Fed has global mandates, which could be in conflict with domestic regs.
Are we going to see Bernanke or his successor testifying to Congress, explaining to them how he would like to tell which bank is in trouble systemically, but he cannot because of the stigma of releasing that information, like he has done about the which banks are going to the discount window, would not benefit the overall economy.
Many will say this is a consolidation of power under Rahm Emmanuel’s rubric of never let a crisis pass without using it to effect change. Others see this as a move toward global government by consolidating power with central banks.
Personally, I think White House economist Larry Summers is strengthening the importance of his next job.
How does the Fed keep Open Market operations separated from its oversight and regulatory mandate?
Who is going to regulate the next Alan Greenspan, who did not see how easy money can lead directly to systemic risk?
How does the Fed chief react to political pressures and remain independent to work on the world stage?
The administration is closing the Office of Thrift Supervision, which brought us out of the Savings and Loan crisis. This is a federal agency with no conflicts.
I’m not sure how this will play out in Congress, but there should be plenty of push back on the premise. There are many pols who have signed on to Ron Paul’s bill, which is stuck in committee, to audit the Fed and open up the books on some of its operations. This bill should be included in any change in the Fed’s mandate.
News coming out of Chicago gold pits have concerns about the rate of expiring gold contracts taking delivery. People I speak to say this is common news recently as options expiration nears. I believe this could be big news at the end of the week.
Look for volatility in the market tomorrow and Friday. Conventional wisdom is gold rises on dollar weakness, but there appears to be price suppression through perhaps governmental sales of gold to prop up dollar index.
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