THE PLANK NOVEMBER 12, 2009
I agree with Ezra Klein that Chris Dodd’s financial regulatory reform bill takes the surprisingly populist tack of stripping powers from the Federal Reserve and making the bank more accountable to Congress. As he points out:
Fed skepticism has been much more prevalent among Ron Paul supporters and Tea Partiers than MoveOn.org members. Indeed, the financial regulation plan developed by Barney Frank was fairly friendly toward the Fed. The financial regulation plan developed by House Republicans was not.
But though there’s no doubt that the rage against the Fed has mostly been coming from the right--and the grassroots, Tea Party-style right at that—the central bank hasn’t been without its critics on the left. Chief among them? None other than liberal lightning rod Alan Grayson, the Florida Representative better known for his attention-grabbing, conservative-bashing outbursts than his ideological affinity with Washington’s elder statesmen.
Before declaring that the GOP wanted Americans to “die quickly,” Grayson was best known for railing against the Federal Reserve for a lack of transparency and accountability. The Fed, in fact, was at the heart of his most recent impropriety: His “K Street whore” comment was directed to Linda Robertson, the former Enron lobbyist hired to rehabilitate the Fed’s image. More substantively, Grayson was one of the first House Democrats to advocate for Ron Paul’s “Audit the Fed” bill, which went from being a pet cause for libertarians to a measure Frank expects to pass the House--partly due to Grayson’s efforts to get over 100 Democrats behind the bill. So far, Grayson has focused more on such transparency measures than proposals to take powers away from the Fed. But it’s easy to imagine him being more sympathetic to Dodd’s Agency for Financial Stability, which will task a separate council to gauge whether firms pose a systemic risk, than Frank’s proposal to empower the central bank.
As Dodd’s bill is unlikely to draw much support from anti-Fed Tea Partiers--Shelby, the ranking Republican on the Banking Committee, has already lashed out against its consumer protection measures--his legislation might benefit from anti-Fed sentiment on the left. What’s more, Dodd himself could stand to gain from an alliance with anti-establishment liberals in terms of his own re-election effort, with the polls now showing him trailing his main GOP challenger by 11 points. Part of the reason Dodd says he mistrusts the Fed in the first place is that the central bank funneled billions to AIG--the firm at the center of the executive bonus scandal that ensnared the Connecticut senator earlier this year. Cast by his opponents as a Beltway establishmentarian, Dodd is still struggling to distance himself from the deep-pocketed financial services industry. And the support of unapologetic leftist firebrands like Grayson could bolster that effort.