CAN I MARRY YOU?

It was quite a show from the get-go. Our Hero appeared before The Congressional Oversight Panel ("COP") up on the Hill today armed with pages of testimony on various bail-outs and fix-it projects. He was rolling right along in bureaucratic other-speak when the Chairperson of the gathering, Elizabeth Warren of the Harvard Law School told him to shut up. Well, she wasn't that blunt but she did tell him to finish up because she was a lot more interested in his answers to the questions that were about to be posed Twice. If available, Ms. Warren I will marry you. There's a couple of problems but we can work them out. If only more things in D.C. were run like this. Of course, Our Hero proceeded to give few satisfactory answers to anything and in fact did admit that he had no idea how to extract the government from its position in AIG much to the feigned surprise of all on the panel. One could actually say that Mr. Geithner had a very shaky grasp of all he discussed leading to the assumption that he may not really be Da Man after all. Methinks we might have an order-taker on our hands and not the executive chef of the repast. Unfortunately, the head cook, whomsoever that may be, appears to be unable to boil water at this stage. Tough cooking the meal when you haven't a clue as to the menu. Anyway, let us continue with our Fed-spec.

Since suggested in this space some weeks ago, there seems to be a full consensus emerging that Mr Bernanke has indeed gone over to the dark side and taken the entire staff (at least the D.C. staff) into the collaboratory mode with this administration as opposed to the normal role of independence in a manner not heretofore seen in recent memory. "Why the concern," one might ask and a valid question it is. To begin, there are now no checks on what is clearly the most radically expansionist fiscal plan in the history of the world. Secondly, while one can argue that there may be an intellectual communion between the Fed and the Administration, one has to be concerned that in the duality of the Fed's mandate--monetary stability and economic stability--the latter has completely overwhelmed the former with adoption of the view that we can fix any inflationary problems that emerge at a later date with the tools available. Thirdly, one must also question how great is the concern on Mr. Bernake's part that the reported oft-mentioned promises to Mr Summers that he would become the next Fed Chair and his desire to prevent that from happening has influenced his actions.

So, what one may argue, if this is the right approach. Perhaps, but in the process if any of the foregoing is correct--or if all are correct--the confidence and trust in the institution as an independent contributor and, indeed arbiter, of economic policy in this country may be irretrievably lost; which, IMHO is an enormous and frightening event.

Another consideration. The Leader is constantly speaking of how this country must constantly seek international cooperation in all matters. Fair enough, but there will be many instances in the near and distant future, as in the past, where it will become necessary for the major central banks in the world to cooperate with one another. It is quite one thing for a central bank to cooperate with another of its ilk; it is quite another thing to cooperate with the arm of a political regime whose interests may not be the same or which may be in conflict with one's home country, or in the case of the EU, a group of countries. The history of the Bank of England up until very recent times is a prime example of such a relationship. This is a difficult thing for those who stand as casual observers to this interplay to understand, but it is very real and very important. Already, one can notice the friction that has been on clear display over the past few months (not just with the present administration) between the Federal Reserve and it's European counterparts even with Mr. Bernake at the helm. I shutter to think of Mr. Summers, whose personality is, shall we say, off-putting at times, being viewed in any light other than as
a politician.

Finally, Monetary policy is not, in my experience as an observer, something that often turns on a dime especially if the people involved in setting such policy may be forced to admit that hey were wrong at a previous moment. As I said at least a month ago, we have seen this movie before. It was called The Seventies. It was ugly. The remake is shaping up to be a real horror. Keep the kiddies at home if this doesn't get stopped.


In this posting on Central Banks there must unfortunately be A Last Post. Eddie George, former Governor of the Bank of England died the other day. I didn't know Mr. George well at all but the times we met I liked him. It was under his watch that the Old Lady became independent of the Treasury but also lost a good deal of its regulatory oversight to the newly created FSA. Mr. George opposed that. He was correct to do so. Flights of Angels Mr. George.