Forbes urges Senate scrutiny of next Fed chair

Steve Forbes uses his latest Forbes magazine column to urge U.S. senators to take a critical look at Janet Yellen, President Obama’s nominee to be the next leader of the Federal Reserve.

To “stimulate” the economy our central bank, at the direction of Ben Bernanke, has undertaken unprecedented actions that have immensely harmed credit markets, thereby retarding recovery. They have the potential to inflict even greater damage on us and the world than the 2008-09 crisis. Without congressional authority the Fed has assumed enormous economic powers. Even worse, despite the Fed’s manifest failures before and after the economic crisis, Congress has granted it other powers that threaten our economic future. The Fed houses the Consumer Financial Protection Bureau, which wields almost unbridled authority over banks and finance companies regarding mortgages, credit cards and other lending activities, and gives it whatever funds it wants. The bureau has no real accountability to Congress, which is why it can hire like crazy at a time of supposed federal budget tightness and lay out a reported $95 million in “office renovations.”

Yellen must be grilled hard regarding how she plans to unwind the Fed’s promiscuous bond buying. The central bank’s recent botched attempt at “tapering” demonstrates how difficult this will be. Much of Wall Street is addicted to the process, as stock and bond gyrations during the “tapering” fiasco attest. When it comes to bond prices, unwinding is going to be rough. Markets try to anticipate the future, and if traders and investors think more normal interest rates are coming down the road, they will mark the value of bonds down now, not gradually.

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