Zachary Karabell: GOP’s Irrational War on the Fed

October 12th, 2011

The Daily Beast
By Zachary Karabell
Oct. 12, 2011

Early in last night’s Republican primary debate, the ever-provocative, always-entertaining and occasionally astute Newt Gingrich launched a broadside against Fed Chairman Ben Bernanke: “Bernanke has in secret spent hundreds of billions of dollars bailing out one group and not bailing out another group. I don’t see anybody in the news media demanding the kind of transparency at the Fed that you would demand of every other aspect of the federal government. And I think it is corrupt and it is wrong for one man to have that kind of secret power.”

This assault builds on Gov. Rick Perry’s remark a few weeks ago that if the Fed undertakes any further financial maneuvers designed to add more money to the ailing economy, he would not be averse to seeing Bernanke tried for treason. Gingrich’s call was ardently endorsed by Congressman Ron Paul, who has been manning the barricades of the Republican war against the Fed for years. Paul admits that bubbles rise and fall for multiple reasons, but he puts the Federal Reserve accountable for what he believes are egregious and secretive bailouts of Wall Street and now European banks. On that score, not only the Republican base but the Wall Street protesters would agree.

The Fed’s actions are often opaque, and Paul has done a service demanding more transparency. But all government agencies exercise some degree of secrecy, and frequently for good rather than pernicious reasons. Not everything should be exposed in real time to constant critique. That would be paralyzing. But the Republican assault on the Fed is one part of a narrative that holds that the current economic malaise is a product of the corruption of Washington in general and the Democrats in particular. In that story, Barney Frank forced banks to make bad loans to poor people, which created the housing bubble and then brought down those banks, which in turn were bailed out not just by Congress but by a Federal Reserve acting above the law and shrouded in secrecy to save Goldman Sachs.

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