Donald Trump and the GOP need an easy, highly visible legislative victory. Breaking up the Fed meets this criteria.
In the aftermath of the Great Financial Crisis, policymakers rushed out the Dodd-Frank Act. This Act increased the Fed’s responsibilities. However, policymakers did this without examining the Fed’s performance in the run-up to the financial crisis.
Had they done so, they would have seen the Fed failed as a bank supervisor and regulator. This failure alone mandates breaking up the Fed. After all, why should the Fed be given a second chance given how much its failure hurt the global real economy and taxpayers?
Furthermore, this failure strongly suggests policymakers shouldn’t have rewarded the Fed with additional responsibilities. After all, there is no reason to believe the Fed’s failure as a bank supervisor and regulator won’t be repeated with any new responsibilities. To the extent these new responsibilities exist in the Dodd-Frank Act, they too should be stripped away.
What the Fed should be left with is responsibility for monetary policy and the payment system.
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Although I agree with this in principle, the timing could not be worse.
This would have worked well under the oversight of someone like Dr. Ron Paul. The current bozos in Congress and the Treasury CANNOT be trusted with this kind of overhaul.