The Coven

Souls of the Gluttonous, Gustave Doré
from Dante's Purgatorio

GOLD - GOLD - GOLD - GOLD.
Bright and Yellow, Hard and Cold,
Molten, Graven, Hammered, Rolled,
Hard to Get and Light to Hold;
Stolen, Borrowed, Squandered - Doled
--Greed (1924)
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In the Doré illustration, the first supplicant bears a stern resemblance to FRB Chairman Ben Bernanke (sorry.)

How nice that the Federal Reserve could convene in pre-dawn hours this week to fork over money to Bear Stearns Cos., an investment bank which made some rather poor choices over the gluttonous past several years. In providing these short-term loans, the Fed used a rarely accessed Depression-era provision ("Fed and Rival Bail Out Bear Stearns.")

Bear Stearns is the second largest U.S. lender, and if it went under "has the potential of bringing down the whole market," said analyst Richard Bove. It would have international reverberations, as well, as the subprime securities it controlled are held worldwide.

Since the economy --which George W. Bush assures us is not in the "R" word (we presume he means we will just move straight to the "D" word) -- is a grave concern for so many, and since this is an election year and the people are looking for help in their choice of candidate, it is important to realize the president has no control over the Fed. The Fed manages the economy, and nobody manages the Fed.

As the WaPo's Robert Samuelson wrote in "It's Not the Economy," the president has very little impact in this arena. Therefore, voting for president on the basis of economic concerns is not sound, as he or she will have little impact on the direction of the economy.

The Week magazine recently featured a good overview of the Fed, this system of 12 government banks created in 1913 to "keep prices stable and long-term interest rates moderate" (Briefing: The Power of the Fed.)

"That may sound arcane, but the Fed’s machinations affect everything from the price of home loans to whether the economy is adding jobs or losing them. When the Fed manages the economy well, said former Fed official Robert McTeer, 'fewer people go to prison, more are healthier because they can afford to take better care of themselves, even the environment gets better taken care of.'"

By those accounts, it would seem the Fed is not managing the economy well.

The Fed sets interest rates via a

"murky process mostly done in private. The decision to raise or lower rates is made by the Federal Open Market Committee, which includes the Fed chairman, Ben Bernanke, and five regional Fed officials. . . The Fed rarely reveals what specific data guided a particular decision, which bothers critics. 'The nation pays a terrible price for allowing this cloistered governing institution to evade serious public scrutiny,' said William Greider, author of a critical book on the Fed."

The Fed doesn't answer to elected officials and is free of Congressional control. Capitalism is the basis of the U.S., yet the Fed controls capital that is beyond the voter's control.

Why does it matter who is president if your concerns are economic; these guys control the nation's economic life. And the Fed will not respond to the will of The People.

The will of the bankers rules.