Volcker wants the Fed authority to be reviewed

We are starting to get to interesting points, with Tea Parties, threats of secession from Texas, and now Volcker - the legendary Fed Chairman who avoided a collapse of the dollar following the reckless actions of his predecessor: Arthur Burns who probably deserves the 3rd place on the podium of the most disastrous Fed Chairman after Bernanke who amazingly in just two years manage to beat Greenspan who reigned for 18 years.

This is fantastic news, and I hope that things are going to move in the right direction: reducing as much power as possible, or even better but quite unlikely, abolishing it.

April 18 (Bloomberg) -- Former Federal Reserve Chairman Paul Volcker said Congress will probably review the authority granted to the Fed following emergency credit programs doubling the central bank’s balance sheet to $2.19 trillion.

“I don’t think the political system will tolerate the degree of activity that the Federal Reserve, in conjunction with the Treasury, has taken,” Volcker, head of President Barack Obama’s Economic Recovery Advisory Board, said today at a conference at Vanderbilt University in Nashville, Tennessee.

U.S. lawmakers from both political parties have expressed concern in recent months that the central bank has overstepped its authority by creating several emergency credit programs aimed at reviving lending and ending the recession.

“I think for better or for worse we are at a point where the Federal Reserve Act, after all that has been happening in the last year or more, is going to be reviewed,” Volcker said.

Under the act the central bank may in “unusual and exigent circumstances” lend to “any individual, partnership, or corporation” as long as the loans are secured “to the satisfaction” of the Fed.

Lawmakers including House Financial Services Committee Chairman Barney Frank have said Congress should consider revising the Depression-era emergency provision.

The central bank has been using such powers “with great abandon,” Frank, a Massachusetts Democrat, told reporters in January. “Ultimately we have to do something about this statute.”

Volcker didn’t predict the future powers of the central bank.

“It’ll be very interesting to see what the role of the Federal Reserve will be,” Volcker said. The possibilities “range all the way from giving the Federal Reserve more supervisory and regulatory responsibility to largely taking away” those powers.
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