Getting It Wrong at the Fed

The Federal Reserve is America’s central bank, and its managers are political appointees. But transparency — an essential feature of the republican form of government — is something that doesn’t quite describe the information we (and our representatives) get about that institution.

“Opacity” is probably the best word to describe former Fed Chair Alan Greenspan’s speeches to Congress — deciphering his testimony was often more difficult than a line-​by-​line interpretation of a Sorbonne phenomenologist.

And full transcripts of the Open Market Committee reports go public only after a long lag. Only last week did 2006’s Federal Reserve insider badinage escape the confines of secrecy, and boy, what a pathetic situation was revealed.

Remember, in 2006 the mortgage boom was reaching its peak, and its excesses were obvious. Federal Reserve insiders made jokes about it, yet “gave little credence to the possibility that the faltering housing market would weigh on the broader economy,” as Binyamin Appelbaum noted in the Wall Street Journal. Geithner went so far as to say that the market’s “fundamentals” looked good, and that outgoing chairman Greenspan’s “greatness … was not fully appreciated,” which Appelbaum cautions is “an opinion now held by a much smaller number of people.”

This weekend at Townhall​.com, I wrote that Rep. Ron Paul was surely right to focus on the Federal Reserve all these years. He bucked the tide and proved himself prescient, just as the folks within the Fed, engaging in groupthink and chummy insider-​to-​insider praise, proved themselves quite clueless.

This is Common Sense. I’m Paul Jacob.