On May 8, lobbyists representing many of the nation's banks and hedge funds huddled with senior White House advisers in the Roosevelt Room, seeking to snuff out an administration plan to increase the Fed's authority to regulate them, when Treasury Secretary Timothy F. Geithner stuck his head in the door.
Fresh from meeting with Obama, Geithner asked the lobbyists what they were up to. When they explained they preferred that a council of regulators, rather than the central bank, safeguard the financial markets, Geithner silenced the discussion with a string of obscenities, according to people who were present.
"I don't believe in rule by committee," he said.
I'm not even sure I can imagine Geithner swearing, much less at bank lobbyists, but there you have it. I think Geithner is right about having the Fed be the main regulator of big banks -- see Tyler Cowen for why -- but it's absolutely imperative that Congress makes the Fed much more transparent and accountable to the public, and undertakes reforms to ensure that the regional Feds, which handle much of the regulation, aren't dominated by representatives of the banking industry as they currently are. Luckily, both Chris Dodd and Barney Frank have expressed their skepticism about the Fed's current arrangements and seem likely to take action and fix the problem.
-- Tim Fernholz
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