WASHINGTON — Suddenly the Federal Reserve is everybody’s punching bag.
Strip the Fed of its bank regulation powers, some in Congress are demanding. Get probing audits of its behind-the-scenes operations, others say.
The chairman of the Federal Reserve Board is always fair game for criticism and second-guessing. But this year, the criticism is broader as Congress responds to public anger that the Fed bailed out Wall Street but not ordinary Americans.
Fireworks seem likely at Senate confirmation hearings next month on the nomination of Ben Bernanke to a second term as chairman.
Many economists and Fed watchers say congressional efforts to rein in the Fed’s powers could interfere with the central bank’s ability to guide the economy to recovery.
The Fed’s unique ability to create money out of thin air enabled it to act quickly to stabilize the financial system, which froze up in September 2008 after the bankruptcy of the Lehman Brothers, Fed backers say.
“It might have been the Fed’s finest moment when it had to jump into the market,” said David M. Jones, a former Fed economist and president of DMJ Advisors, a Denver-based consulting firm. “We still have to wait to see how effective the Fed is in its exit strategy and whether it can keep inflation in check. But this badgering by Congress, even if there is populist sentiment, is inappropriate.”
