In an attempt to stop the rot on Wall Street, the Federal Reserve recently granted special borrowing rights to Wall Street’s largest investment banks. That decision smells of special dealing for special interests. The decision subsidizes these big powerful firms, thereby distorting financial markets in their favor. Behind the decision lies the problem of excessive representation of Wall Street interests within the Fed.

The Fed's response to the crisis, combined with its earlier massive policy failure to address the housing price bubble, raise grave questions about its independence and judgment. At this stage, Congress should launch formal hearings into the governance of the Fed, which has remained largely unchanged since the 1930s.