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It’s time to audit the Fed


The centerpiece of the Obama administration’s long awaited financial regulatory reform package is to give more power to the Federal Reserve to oversee any financial institution deemed too big to fail.

Team Obama seems to have decided that the Fed should emerge as the premier financial regulator, even though it has just as much egg on its face as the much-maligned Securities and Exchange Commission for failing to blow the whistle on Wall Street’s excesses.

After all, it’s the Fed that seemingly looked the other way when Citigroup was moving aggressively into collateralized debt obligations, structured investment vehicles and other exotic investments that now sit like a mountain of lead on the bank’s balance sheet. Go back to the Enron scandal and you’ll find that the Fed was just as oblivious as other regulators to how Citi and JPMorgan Chase & Co. were enabling Enron to disguise billions of dollars in loans as gas trades.

Now it’s not surprising the Obama plan puts a lot of stock in the Fed, given that Treasury Secretary Geithner most recently ran the NY Fed.