Vern McKinley on the issue:
http://ml-implode.com/staticnews/20...alCandidateVernMcKinleyOnTheFinancialCri.html
AK: You write on the question of whether commercial bank supervision should belong to the central bank or with a separate oversight authority. Do you favor one or the other? The Fed seems to have eschewed bank supervision, with Treasury (OCC and OTS) having served as the prime national banking regulators in recent years. Now the Paulson proposal calls for much banking regulatory authority to be returned to the Fed. Is that a good idea? Even Bernanke seemed cool to the suggestion.
VM: Concentration of power in a central bank worries me, and the powers should be narrow. As Lord Acton warned, "Power tends to corrupt; absolute power corrupts absolutely."
We have career politicians deferring to bureaucrats often lacking real world experience. In addition, as I've explained on many occasions, we need to strip the Fed down to a simple mission of price stability. I would prefer to separate the roles of supervision and monetary policy to allow focus on price stability; and also avoid any conflicts between the objectives of price stability and supervision.
I have extensive experience working at the Federal Reserve and the Office of Thrift Supervision--as well as cleaning up the Savings & Loan bailout while at the Resolution Trust Corporation--so I understand these bureaucracies. After that, I went into the private sector and have advised governments all over the world on how to deal with these questions. Now I look forward to the opportunity to serve in Congress so I can use my experience to fix the problems my family and other Americans face today.
AK: On Fed transparency: it is our suspicion that this is not really genuine, since the Fed seems cognizant of the fact that its own statements and decisions are the most watched indicators in the world financial economy. In fact we have observed that bond market behavior inverted in the mid-90s when the Fed reformed itself to be "more transparent", and the market began expecting "telegraphed" information regarding interest rate policy. There is even a Fed funds "futures" market now which is largely based on these statements. So now, perceived direction has become more important than interest rate level, and interpreting Fed statements has become a black art.
Do you think the Fed is transparent? Can the Fed be more transparent, should it try, or will it inevitably undermine its own objectives and influence?
VM: Obviously as a public entity the Fed should be transparent, but this is not an area that I have studied as much as the efficiency issue. I know there have been Congressional proposals to increase transparency of the Fed and especially its open market operations. While I'd have to look at the specific legislative language, I would work to increase Fed transparency if elected to Congress.
AK: Is Bernanke conservative or profligate? Fed watchers seem to be acrimoniously divided on that question. How is he handling the financial crisis?
VM: Given that we have a financial crisis, I have to question the job he is doing, but like all actions of the Fed it will be difficult to judge how good a job he is doing until many years into the future. To the extent that Chairman Bernanke has suggested that market failure is to blame in the crisis and that government policy has to address excesses in the market I have disagreed with him.
