I just finished reading a terrific article that summarizes what a few of the past greats in central banking are thinking today. From Volcker to Greenspan (who's book I'm just finishing) to today's Bernanke, the great comparison is made between the panic of 1929 and today's financial credit crisis. I highly recommend the article, which can be found here.

Here is a short excerpt to get pique your curiosity:

Bernanke, now the Fed chairman, has responded with the most-aggressive expansion of the Fed's power in its 95-year history. Since last August, Bernanke, 54, has twice cut interest rates by 75 basis points, made Federal Reserve loans available to investment firms for the first time since the 1930s, lowered the rates at which banks can borrow from the Fed and launched an unprecedented rescue of Bear Stearns Cos., the struggling investment bank. (A basis point is 0.01 percentage point.)

Could you imagine a financial system without the SEC? Who would send all the big-wigs to jail if it were abolished as the plans suggest? The answer; the Fed. That's right! The Fed is going to being seeing a growth in its powers from the significant increases it already received thanks to Sarbanes-Oxley.

Resulting from the Paulson Report is that the Fed will have the power to do anything, and go anywhere, it wants. On the one hand, you can certainly appreciate how this might work to keep the financial system, and those responsible for it, in-line, however, it's also a little scary to think of what may come as a result. What is it that they say about "ultimate power" again?

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3.23 Copyright (C) 2007 Alain Georgette / Copyright (C) 2006 Frantisek Hliva. All rights reserved."