1 00:00:04,880 --> 00:00:08,319 Speaker 1: On this episode of the News World. On Thursday, July 2 00:00:08,400 --> 00:00:12,440 Speaker 1: twenty fourth, President Trump, along with Senator Tim Scott, chairman 3 00:00:12,440 --> 00:00:15,960 Speaker 1: of the Senate Banking Committee, visited the Federal Reserve Building, 4 00:00:16,520 --> 00:00:20,720 Speaker 1: taking a tour of the three billion dollar construction project underway. 5 00:00:21,320 --> 00:00:25,480 Speaker 1: They were accompanied by Federal Reserve Chairman Jerome Power. At 6 00:00:25,520 --> 00:00:29,480 Speaker 1: a press conference after the tour, they discussed the ballooning 7 00:00:29,560 --> 00:00:33,959 Speaker 1: costs of the project. The renovation project has soared from 8 00:00:34,040 --> 00:00:38,440 Speaker 1: one point nine billion to three billion dollars in construction 9 00:00:38,560 --> 00:00:42,720 Speaker 1: cost in recent years, So just what are your taxpayer 10 00:00:42,760 --> 00:00:49,440 Speaker 1: dollars buying? Well, some of the upgrades including glass enclosed hatreoms, 11 00:00:50,080 --> 00:00:54,160 Speaker 1: rooftop gardens for the exclusive use of its officials and staff. 12 00:00:55,120 --> 00:00:58,920 Speaker 1: In his recent policy brief, the Federal Reserve should welcome 13 00:00:58,960 --> 00:01:03,600 Speaker 1: the appointment of an independent Inspector General. Andrew Levin details 14 00:01:03,640 --> 00:01:08,280 Speaker 1: why the Fed's headquarters is like building quote a Versailles 15 00:01:08,360 --> 00:01:12,080 Speaker 1: Palace on the National Mall. I'm really pleased to welcome 16 00:01:12,120 --> 00:01:15,080 Speaker 1: my guest, Andrew Levin. He is a professor of economics 17 00:01:15,120 --> 00:01:18,040 Speaker 1: at Dartmouth College. He worked at the Federal Reserve Board 18 00:01:18,120 --> 00:01:22,160 Speaker 1: for two decades, including two years as a special advisor 19 00:01:22,200 --> 00:01:38,680 Speaker 1: on Monetary Policy, Strategy and Communications. Andrew, welcome and thank 20 00:01:38,720 --> 00:01:40,000 Speaker 1: you for joining me in news World. 21 00:01:40,440 --> 00:01:41,440 Speaker 2: What's great to be with you. 22 00:01:42,080 --> 00:01:44,640 Speaker 1: Before we dive in, tell me how you got to 23 00:01:44,680 --> 00:01:47,319 Speaker 1: the Federal Reserve in what your years there were, like. 24 00:01:48,600 --> 00:01:51,880 Speaker 2: I started there in nineteen ninety two. This was in 25 00:01:51,920 --> 00:01:55,680 Speaker 2: the green Span era, and over the course of the nineties, 26 00:01:55,760 --> 00:01:59,280 Speaker 2: Alan Greenspan was considered the maestro and later he was 27 00:01:59,320 --> 00:02:02,440 Speaker 2: even called the favor of the world. Because the US 28 00:02:02,560 --> 00:02:07,000 Speaker 2: economy got pretty unscathed through the Asian financial crisis in 29 00:02:07,040 --> 00:02:09,880 Speaker 2: the late nineties and there was a Russian bond default. 30 00:02:10,480 --> 00:02:13,600 Speaker 2: But Roger Ferguson was the vice chair and had come 31 00:02:13,639 --> 00:02:15,840 Speaker 2: from a management background, and it was very careful in 32 00:02:15,960 --> 00:02:19,680 Speaker 2: bay frugal and recognized that Congress was looking over the 33 00:02:19,680 --> 00:02:23,880 Speaker 2: FED shoulders. So in nineteen ninety nine, the FED launched 34 00:02:23,919 --> 00:02:26,760 Speaker 2: a major renovation of its headquarter building. It's called the 35 00:02:26,760 --> 00:02:30,480 Speaker 2: Ecchos Building. It was opened in nineteen thirty seven during 36 00:02:30,520 --> 00:02:35,520 Speaker 2: the Great Depression. Beautiful, spectacular building. But during that period 37 00:02:35,520 --> 00:02:38,480 Speaker 2: from nineteen ninety nine to two thousand and three, they 38 00:02:38,480 --> 00:02:42,440 Speaker 2: did a major renovation. They replaced the roof, replaced all 39 00:02:42,440 --> 00:02:46,320 Speaker 2: the major building equipment. They took out asbestos insulation which 40 00:02:46,400 --> 00:02:49,520 Speaker 2: was still in some of the walls, replaced all the wiring, 41 00:02:49,600 --> 00:02:53,800 Speaker 2: all the plumbing, all the ventilation ducts. They refurbished all 42 00:02:53,800 --> 00:02:57,200 Speaker 2: the furniture, the carpets, everything, and it was done carefully 43 00:02:57,560 --> 00:03:00,760 Speaker 2: over three and a half years, twenty two stages. So 44 00:03:00,840 --> 00:03:04,320 Speaker 2: each group of staff was sent to an off site 45 00:03:04,400 --> 00:03:07,520 Speaker 2: location for six months, including me. I remember it, and 46 00:03:07,560 --> 00:03:10,320 Speaker 2: when we came back, we're like, Wow, it's a beautiful building. 47 00:03:10,360 --> 00:03:12,440 Speaker 2: We got a new carpet and some new furniture, and 48 00:03:12,480 --> 00:03:15,120 Speaker 2: the bathrooms look a lot nice sided. If you'd ask 49 00:03:15,240 --> 00:03:17,600 Speaker 2: me in two thousand and three when they finished the innovation, 50 00:03:18,240 --> 00:03:22,160 Speaker 2: do we need a billion dollar upgrade? And remember we're 51 00:03:22,160 --> 00:03:24,320 Speaker 2: talking about less than a thousand people who work in 52 00:03:24,320 --> 00:03:26,880 Speaker 2: that building, so a billion dollars it's like, I'm more 53 00:03:26,919 --> 00:03:30,799 Speaker 2: than a million dollars per person. I would have just said, 54 00:03:31,320 --> 00:03:35,840 Speaker 2: that's never going to happen. Roger Ferguson, Alis Rivlin, Donald Cone, 55 00:03:35,880 --> 00:03:38,240 Speaker 2: who was the next viceair after. They were all very frugal, 56 00:03:38,360 --> 00:03:41,880 Speaker 2: very careful. These are public funds. We can't waste it. 57 00:03:42,440 --> 00:03:45,160 Speaker 1: I mean, when you put it that way, it's almost 58 00:03:45,200 --> 00:03:46,040 Speaker 1: beyond absurd. 59 00:03:46,480 --> 00:03:49,640 Speaker 2: Well, I think that It's important here to understand that 60 00:03:49,840 --> 00:03:54,080 Speaker 2: this is taxpayer money. And there's been some reports in 61 00:03:54,120 --> 00:03:57,400 Speaker 2: some media outlets that have kind of suggested, oh, the 62 00:03:57,440 --> 00:03:59,440 Speaker 2: FED makes its own money and it can do whatever 63 00:03:59,440 --> 00:04:03,400 Speaker 2: it wants with it it. That's false, Okay. The fact 64 00:04:03,440 --> 00:04:06,080 Speaker 2: of the matter is, and Chair Powell himself has said 65 00:04:06,080 --> 00:04:09,680 Speaker 2: this on numerous occasions, these are public funds. Now. In 66 00:04:09,720 --> 00:04:12,920 Speaker 2: normal times, the FED actually makes a profit from its 67 00:04:12,960 --> 00:04:16,920 Speaker 2: paper cash, and the right that it's had since nineteen 68 00:04:16,960 --> 00:04:19,640 Speaker 2: thirteen when the FED was created is take a small 69 00:04:19,680 --> 00:04:23,479 Speaker 2: slice of those profits and pay its staff, pay you 70 00:04:23,560 --> 00:04:27,560 Speaker 2: for electricity, pay for renovation of its building. Okay. All 71 00:04:27,600 --> 00:04:29,560 Speaker 2: the rest of it goes to the treasury, either to 72 00:04:29,600 --> 00:04:32,560 Speaker 2: reduce the debt or to cut taxes, or to find 73 00:04:32,600 --> 00:04:36,240 Speaker 2: it some new programs. Okay, it's public funds now. The 74 00:04:36,279 --> 00:04:40,160 Speaker 2: FED in twenty twenty had a major balance sheet program. 75 00:04:40,600 --> 00:04:44,600 Speaker 2: They lost a rituillion dollars. So for the last three 76 00:04:44,640 --> 00:04:47,000 Speaker 2: years the FED has not been making profits, it's been 77 00:04:47,080 --> 00:04:50,599 Speaker 2: losing money. Well, how does it cover its expenses now, 78 00:04:50,680 --> 00:04:54,520 Speaker 2: including these grand new buildings. Answer, they're borrowing from the public. 79 00:04:55,480 --> 00:04:57,880 Speaker 2: And what's amazing about that is it doesn't count in 80 00:04:57,920 --> 00:05:02,000 Speaker 2: the debt ceiling. The federers serve's budget is off ballance sheet, 81 00:05:02,400 --> 00:05:04,520 Speaker 2: so the Federal Reserve can borrow from the public and 82 00:05:04,640 --> 00:05:08,919 Speaker 2: essentially increase the national debt without having to go through Congress. 83 00:05:10,080 --> 00:05:12,599 Speaker 1: To be again, just for those of us who lack 84 00:05:12,680 --> 00:05:15,360 Speaker 1: the kind of knowledge you have, how does the FED 85 00:05:15,480 --> 00:05:16,120 Speaker 1: make money? 86 00:05:17,120 --> 00:05:20,640 Speaker 2: It's actually pretty simple. The FED when they issue paper 87 00:05:20,640 --> 00:05:23,080 Speaker 2: cash and right now, these are dollar bills. If you 88 00:05:23,120 --> 00:05:25,960 Speaker 2: look one in your wallet, twenty dollars bill, at the 89 00:05:25,960 --> 00:05:28,320 Speaker 2: top of it, it says Federal Reserve note. Think of 90 00:05:28,360 --> 00:05:31,120 Speaker 2: it as an iou. Now, when the FED was created, 91 00:05:31,160 --> 00:05:33,359 Speaker 2: we under the gold standard, and so it literally was 92 00:05:33,360 --> 00:05:36,560 Speaker 2: an iou. You could get a bar of gold or 93 00:05:36,600 --> 00:05:40,359 Speaker 2: the equivalent of gold coins or whatever for those dollar bills. 94 00:05:40,880 --> 00:05:42,960 Speaker 2: We went off the gold standard in the thirties, so 95 00:05:43,040 --> 00:05:46,679 Speaker 2: since then it's trust and you can use those dollar 96 00:05:46,720 --> 00:05:49,000 Speaker 2: bills to pay for things, or you can use it 97 00:05:49,040 --> 00:05:52,200 Speaker 2: to pay your taxes. In April, they're IOUs. They don't 98 00:05:52,360 --> 00:05:55,400 Speaker 2: pay any interest. So the great thing for the FED, 99 00:05:55,480 --> 00:05:58,599 Speaker 2: the reason it's such a profitable monopoly, is because the 100 00:05:58,640 --> 00:06:03,160 Speaker 2: FED uses those paper dollar bills to buy treasury securities. 101 00:06:04,160 --> 00:06:09,200 Speaker 2: The treasury securities pay interest. The interest earnings on the 102 00:06:09,200 --> 00:06:13,080 Speaker 2: fedce portfolio are used to cover its expenses, and then 103 00:06:13,120 --> 00:06:16,120 Speaker 2: the rest goes back to the Treasury. That was the 104 00:06:16,120 --> 00:06:19,440 Speaker 2: deal Congress created in nineteen thirteen. That's the way it 105 00:06:19,480 --> 00:06:22,599 Speaker 2: worked all the way until three years ago. Now it's 106 00:06:22,640 --> 00:06:26,080 Speaker 2: gone because the Federal Reserve basically wasted a trillion dollars 107 00:06:26,160 --> 00:06:30,120 Speaker 2: more than a trillion dollars mismanaging its balance sheet. There's 108 00:06:30,120 --> 00:06:33,760 Speaker 2: no profits. They're borrowing to cover their expenses. 109 00:06:34,160 --> 00:06:36,080 Speaker 1: I mean, isn't that an unstable system? 110 00:06:37,120 --> 00:06:40,840 Speaker 2: Well, I think that there's levels here of problems in 111 00:06:40,880 --> 00:06:44,440 Speaker 2: the Federal Reserve, and the Secretary Bscent recently said there 112 00:06:44,440 --> 00:06:47,400 Speaker 2: should be a comprehensive review of the Federal Reserve. I 113 00:06:47,440 --> 00:06:51,520 Speaker 2: totally agree. Congress should create a blue ribbon commission of experts, 114 00:06:51,640 --> 00:06:57,159 Speaker 2: independent experts to do a careful review the governance, the accountability, 115 00:06:57,160 --> 00:07:00,919 Speaker 2: the transparency. It's a complex system with regional Federal Reserve 116 00:07:00,960 --> 00:07:04,520 Speaker 2: banks and the headquarters in DC. One of the problems, 117 00:07:04,960 --> 00:07:07,800 Speaker 2: I call it the monarchy at the FED, is the 118 00:07:07,800 --> 00:07:11,679 Speaker 2: FED chair is too powerful. When the FED was created, 119 00:07:11,720 --> 00:07:14,200 Speaker 2: the expectation from Congress was it would be a board 120 00:07:14,280 --> 00:07:18,280 Speaker 2: or a commission of experts like the Supreme Court, and 121 00:07:18,320 --> 00:07:20,200 Speaker 2: you know, the Supreme Court. The chief does this is 122 00:07:20,240 --> 00:07:24,760 Speaker 2: first among equals, sometimes gets outvoted, doesn't always write the 123 00:07:24,800 --> 00:07:28,680 Speaker 2: opinion at the Federal Reserve. Whenever you hear about it, 124 00:07:28,680 --> 00:07:32,040 Speaker 2: it's the chair. The photos either of the headquarter billing 125 00:07:32,240 --> 00:07:35,080 Speaker 2: or of the FED Chair. It says everyone else is 126 00:07:35,080 --> 00:07:39,720 Speaker 2: considered deputies and subordinates. And so really the problem in 127 00:07:39,760 --> 00:07:41,880 Speaker 2: the law is the FED Chair is not just chair. 128 00:07:41,920 --> 00:07:47,560 Speaker 2: He's also chief executive officer, and so everything goes through him. 129 00:07:48,280 --> 00:07:51,040 Speaker 2: Chair Palell owns all this. He is the one who 130 00:07:51,040 --> 00:07:54,520 Speaker 2: oversaw these building renovations. He's the one who oversaw the 131 00:07:54,600 --> 00:07:57,360 Speaker 2: trillion dollar losses on the balance sheet. And we can 132 00:07:57,400 --> 00:08:01,880 Speaker 2: list other things too, Boss Congress needs to hold the 133 00:08:01,880 --> 00:08:02,680 Speaker 2: FED accountable. 134 00:08:03,280 --> 00:08:05,960 Speaker 1: The point you made, which despite all the years I've 135 00:08:05,960 --> 00:08:09,000 Speaker 1: looked at the FED as a monitory institution, it never 136 00:08:09,080 --> 00:08:12,640 Speaker 1: quite occurred to me that with almost a thousand employees, 137 00:08:13,240 --> 00:08:15,880 Speaker 1: it actually has to be run. He didn't just have 138 00:08:15,920 --> 00:08:18,760 Speaker 1: a public policy job. He has a management job. 139 00:08:19,920 --> 00:08:23,640 Speaker 2: In principle, the vice Chair of the Federal Reserve would 140 00:08:23,640 --> 00:08:25,920 Speaker 2: do the management part. And that's the way it worked 141 00:08:25,960 --> 00:08:28,640 Speaker 2: under Hells Rivelin in the nineties and then under Roger 142 00:08:28,680 --> 00:08:31,880 Speaker 2: Ferguson and then under Donald Cone. The vice Chair of 143 00:08:31,880 --> 00:08:34,520 Speaker 2: the Federal Reserve right now is Phil Jefferson, but he's 144 00:08:34,600 --> 00:08:39,400 Speaker 2: almost invisible, almost literally invisible since he took that job. 145 00:08:39,920 --> 00:08:42,959 Speaker 2: We know that he's there because he does sign the 146 00:08:43,000 --> 00:08:46,080 Speaker 2: budget memos that they approve every December. 147 00:08:46,880 --> 00:08:48,080 Speaker 1: Unless he has an auto pen. 148 00:08:48,440 --> 00:08:51,240 Speaker 2: But it's interesting because the way those budget memos are 149 00:08:51,480 --> 00:08:55,080 Speaker 2: the cover page, it's from the COO and CFO of 150 00:08:55,120 --> 00:08:57,839 Speaker 2: the Federal Reserve Board the DC headquarters. Okay, the co 151 00:08:58,160 --> 00:09:02,200 Speaker 2: and the CFO via the vice chair to the board. 152 00:09:02,960 --> 00:09:05,240 Speaker 2: Now what you might have thought would happened, like a 153 00:09:05,320 --> 00:09:07,760 Speaker 2: board of a hospital, or the board of a nonprofit 154 00:09:07,880 --> 00:09:10,800 Speaker 2: or the board of a corporation, right that there would 155 00:09:10,800 --> 00:09:13,680 Speaker 2: be a meeting of the board to have a pretty 156 00:09:13,760 --> 00:09:17,440 Speaker 2: animated discussion. The Federers are a board doesn't do that 157 00:09:17,960 --> 00:09:20,240 Speaker 2: for many, many many years, as far back as we 158 00:09:20,280 --> 00:09:23,880 Speaker 2: can trace. They do what's called a notation vote, which 159 00:09:23,920 --> 00:09:27,040 Speaker 2: means the budget it is sent around to each of 160 00:09:27,080 --> 00:09:30,480 Speaker 2: the seven governors and they just electronically approve it. They 161 00:09:30,520 --> 00:09:33,920 Speaker 2: never have a meeting, which means there's no government. In 162 00:09:33,920 --> 00:09:37,679 Speaker 2: the Sunshine Act, there's no debate, there's no discussion. It's 163 00:09:37,720 --> 00:09:41,880 Speaker 2: all completely invisible. And again, Congress should look into this, 164 00:09:41,960 --> 00:09:44,800 Speaker 2: and Congress should probably require that the federals are board 165 00:09:44,960 --> 00:09:47,240 Speaker 2: in approving its own budget and the budgets of the 166 00:09:47,280 --> 00:09:50,520 Speaker 2: regional Feds. Should be a public, open meeting and members 167 00:09:50,559 --> 00:09:52,200 Speaker 2: of the press and members of the public could be 168 00:09:52,200 --> 00:09:54,240 Speaker 2: there and say, well, wait a minute here, why do 169 00:09:54,320 --> 00:09:57,800 Speaker 2: you need to build something that's more expensive than versaw. 170 00:10:00,240 --> 00:10:04,920 Speaker 1: Today has ten times as big as staff as it 171 00:10:04,920 --> 00:10:08,560 Speaker 1: had in nineteen thirty six, five times bigger than nineteen 172 00:10:08,640 --> 00:10:14,000 Speaker 1: fifty one. They have increased by about twenty percent since 173 00:10:14,000 --> 00:10:16,480 Speaker 1: twenty ten at a time when the rest of the 174 00:10:16,480 --> 00:10:19,839 Speaker 1: government is getting smaller. What has led to this substantial 175 00:10:19,880 --> 00:10:24,840 Speaker 1: growth in just the staffing of the Federal Reserve. 176 00:10:25,920 --> 00:10:28,680 Speaker 2: Well, there's an immediate cause and then there's a deeper cause, 177 00:10:29,200 --> 00:10:31,160 Speaker 2: and so we can talk about both of those. The 178 00:10:31,320 --> 00:10:35,040 Speaker 2: immediate cause is the Federal Reserve has its own budget 179 00:10:35,160 --> 00:10:38,400 Speaker 2: that doesn't go through Congress, it doesn't go through a 180 00:10:38,480 --> 00:10:43,680 Speaker 2: propriational review. Now, contrasts that with Securities and Exchange Commission. Okay, 181 00:10:43,760 --> 00:10:50,200 Speaker 2: the SEC is an independent agency with independent commissioners. It's 182 00:10:50,200 --> 00:10:54,160 Speaker 2: self funded pretty much through the fees on security transactions 183 00:10:54,200 --> 00:10:58,480 Speaker 2: that the SEC charges. But SEC's budget is completely transparent 184 00:10:58,480 --> 00:11:01,760 Speaker 2: and it goes through the Congressional Creation's process every year. 185 00:11:02,160 --> 00:11:04,480 Speaker 2: Members of Commerce and those committees get to see it 186 00:11:04,840 --> 00:11:07,280 Speaker 2: and they can raise questions. And by the way, the 187 00:11:07,320 --> 00:11:10,680 Speaker 2: SEC doesn't even own any buildings. It leases all of 188 00:11:10,720 --> 00:11:15,560 Speaker 2: its office space from the GSA, so it's depending on 189 00:11:15,640 --> 00:11:18,280 Speaker 2: GSA to do the maintenance and if something needs to 190 00:11:18,320 --> 00:11:20,480 Speaker 2: be changed, GSA takes care of it. It's you know, 191 00:11:20,559 --> 00:11:22,520 Speaker 2: like it's great when you have a landlord who's really 192 00:11:22,600 --> 00:11:26,320 Speaker 2: nice and takes care of things. The SEC is carefully reviewed. 193 00:11:26,760 --> 00:11:30,840 Speaker 2: The Federal Reserve is not. Those budgets are in internal 194 00:11:30,880 --> 00:11:34,280 Speaker 2: memos that are very opaque. Those that are posted on 195 00:11:34,320 --> 00:11:38,400 Speaker 2: the foyer page. There's no index to them. You have 196 00:11:38,440 --> 00:11:40,920 Speaker 2: to basically know what you're looking forward to even find it. 197 00:11:41,640 --> 00:11:45,079 Speaker 2: They're very slow in releasing those internal budget memos. So 198 00:11:45,200 --> 00:11:47,960 Speaker 2: the one that was approved last December was not released 199 00:11:48,000 --> 00:11:51,120 Speaker 2: until two weeks ago, which, by the way, is a 200 00:11:51,160 --> 00:11:54,200 Speaker 2: violation of the law because under the Freedom Inferation Act, 201 00:11:54,200 --> 00:11:57,480 Speaker 2: they're supposed to release it right away, within a week 202 00:11:57,600 --> 00:12:00,920 Speaker 2: or a month. But the main point is that process 203 00:12:01,000 --> 00:12:06,880 Speaker 2: is very opaque. It's hidden. Now, why why is this? Well, 204 00:12:07,040 --> 00:12:10,000 Speaker 2: the answer is because the Federal Serve has basically exempted 205 00:12:10,040 --> 00:12:15,120 Speaker 2: itself from the law. Nineteen twenty one, Congress passed a 206 00:12:15,200 --> 00:12:18,760 Speaker 2: law it's called the Budget and Accounting Act. Every other 207 00:12:18,840 --> 00:12:22,480 Speaker 2: federal agency follows. The Act is very clear, every independent 208 00:12:22,520 --> 00:12:25,760 Speaker 2: agency is supposed to be included in the federal budget. 209 00:12:26,400 --> 00:12:29,440 Speaker 2: But the FED quietly in the twenties and thirties and 210 00:12:29,520 --> 00:12:31,880 Speaker 2: ever since then, said no, we don't need to do that. 211 00:12:33,120 --> 00:12:36,400 Speaker 2: And so I think it's time now for Congress and 212 00:12:36,480 --> 00:12:38,719 Speaker 2: the White House to say, sorry, FED, you guys got 213 00:12:38,720 --> 00:12:40,480 Speaker 2: to follow the law just like everyone else. 214 00:12:41,240 --> 00:12:45,520 Speaker 1: Well, you're suggesting would be a profound shift from a 215 00:12:45,679 --> 00:12:50,000 Speaker 1: theoretically independent FED to a FED which at least indirectly 216 00:12:50,600 --> 00:12:52,160 Speaker 1: would actually be held accountable. 217 00:12:52,880 --> 00:12:56,160 Speaker 2: By the way the US Constitution, the founders were very wise, 218 00:12:56,880 --> 00:12:59,120 Speaker 2: and they were looking at the experience in Britain and 219 00:12:59,160 --> 00:13:01,800 Speaker 2: in France and other countries in Europe. And so the 220 00:13:01,840 --> 00:13:05,840 Speaker 2: conclution very clearly delegated Congress with the duty to regulate 221 00:13:05,880 --> 00:13:09,240 Speaker 2: the value of money. It's crystal clear Article one, Congress 222 00:13:09,240 --> 00:13:12,200 Speaker 2: shall regulate the value of money, not the White House, 223 00:13:12,280 --> 00:13:16,440 Speaker 2: not the executive branch. Congress is the Federal Reserve's boss. Now, 224 00:13:16,600 --> 00:13:20,120 Speaker 2: when we say independence, What we mean is that at 225 00:13:20,160 --> 00:13:24,000 Speaker 2: each meeting that the Fed's Madge Policy Committee meets, there's 226 00:13:24,040 --> 00:13:27,439 Speaker 2: twelve experts. They bring their own points of view, they 227 00:13:27,440 --> 00:13:30,600 Speaker 2: have debates, they have a majority vote, and that's the 228 00:13:30,600 --> 00:13:32,480 Speaker 2: decision of what the interest rate's going to be for 229 00:13:32,520 --> 00:13:35,160 Speaker 2: the next six weeks, and ideally they have a strategy 230 00:13:35,720 --> 00:13:38,360 Speaker 2: how that's going to be adjusted over time, and everyone 231 00:13:38,440 --> 00:13:43,080 Speaker 2: understands the strategy. That's what we mean by independence. Other 232 00:13:43,160 --> 00:13:46,600 Speaker 2: central banks, the European Central Bank, the Bank of England, 233 00:13:46,640 --> 00:13:49,440 Speaker 2: the Bank of Canada, they all have much more oversight 234 00:13:49,480 --> 00:13:55,000 Speaker 2: of the administration, the budgets, the buildings, all these other things. 235 00:13:55,040 --> 00:13:59,400 Speaker 2: The FED is completely unique in having no oversight whatsoever 236 00:13:59,520 --> 00:14:04,240 Speaker 2: of its and no external reviews. Every other major central 237 00:14:04,280 --> 00:14:08,760 Speaker 2: bank on the planet has external reviews. For example, the 238 00:14:08,760 --> 00:14:12,680 Speaker 2: European Central Bank. There's a Supreme Audit Authority of the 239 00:14:12,720 --> 00:14:16,840 Speaker 2: European Union, and that Supreme Audit Authority, which is kind 240 00:14:16,880 --> 00:14:21,600 Speaker 2: of like the US Government Accountability Office the JO. In Europe, 241 00:14:21,840 --> 00:14:25,800 Speaker 2: the Supreme Audit Authority does performance reviews of the ECB, 242 00:14:26,880 --> 00:14:30,160 Speaker 2: the European Central Bank. They do performance reviews of all 243 00:14:30,200 --> 00:14:34,480 Speaker 2: the operations and programs and budgets and everything else. Now, 244 00:14:34,520 --> 00:14:37,640 Speaker 2: not to say it's perfect, because no organization's perfect, but 245 00:14:37,720 --> 00:14:41,600 Speaker 2: the point is it's all open and transparent, and the 246 00:14:41,680 --> 00:14:44,360 Speaker 2: European audit Authory can go to the European parliaments. They 247 00:14:44,360 --> 00:14:47,840 Speaker 2: were concerned. And by the way, guess what, the ECB 248 00:14:48,080 --> 00:14:51,000 Speaker 2: is shrinking the number of buildings they're using in Frankfurt. 249 00:14:51,400 --> 00:14:54,120 Speaker 2: They're going down from three to two. So the irony 250 00:14:54,160 --> 00:14:56,280 Speaker 2: here that at the same time the Federal Reserve is 251 00:14:56,320 --> 00:15:00,800 Speaker 2: doing this major spectacular upgrade to create a side palace 252 00:15:00,880 --> 00:15:03,920 Speaker 2: on the National Mall, the ECB is being frugal in 253 00:15:04,120 --> 00:15:09,239 Speaker 2: shrinking and taking advantage of more people working remotely and downsizing. 254 00:15:09,960 --> 00:15:13,320 Speaker 1: Well, it just seems to me that that would require 255 00:15:13,360 --> 00:15:17,040 Speaker 1: a profound shift in the culture of the agency. 256 00:15:17,960 --> 00:15:21,240 Speaker 2: I agree with that. I think it also require some 257 00:15:21,360 --> 00:15:25,400 Speaker 2: profound shift in members of Congress. And they're thinking about 258 00:15:25,440 --> 00:15:29,320 Speaker 2: this because I think that in the past, let's just say, 259 00:15:29,360 --> 00:15:33,040 Speaker 2: the last few years, it's been amazing how differential Congress was. 260 00:15:34,080 --> 00:15:38,120 Speaker 2: The Senate Banking Committee is really the Fed's boss. Okay, 261 00:15:38,880 --> 00:15:42,080 Speaker 2: they're the ones who approve that confirm the top FED officials. 262 00:15:42,400 --> 00:15:45,240 Speaker 2: They have hearings with the FED Chair and other FED 263 00:15:45,280 --> 00:15:49,800 Speaker 2: officials whenever they want, and under Sherif Brown, there were 264 00:15:49,840 --> 00:15:53,240 Speaker 2: no hearings about the fed's buildings, or its budget, or 265 00:15:53,280 --> 00:15:58,680 Speaker 2: its balance sheet programs none. So in effect, the Senate 266 00:15:58,680 --> 00:16:01,840 Speaker 2: Banking Committee was saying to the FED, go ahead, to 267 00:16:02,040 --> 00:16:05,360 Speaker 2: every want, we trust you, and if you think this 268 00:16:05,400 --> 00:16:07,920 Speaker 2: is worth a tillion dollars, go ahead, And if you 269 00:16:07,920 --> 00:16:10,480 Speaker 2: think you need a three billion dollar palace, that's fine 270 00:16:10,520 --> 00:16:15,680 Speaker 2: with us. Now give credit to Senator Tim Scott and 271 00:16:15,760 --> 00:16:18,800 Speaker 2: some new members of the Center Bank Committee who are 272 00:16:18,840 --> 00:16:21,960 Speaker 2: now saying, hey, we've got to be responsible here. Under 273 00:16:21,960 --> 00:16:26,000 Speaker 2: the Constitution, the Congress is the fedce boss. That can't 274 00:16:26,040 --> 00:16:28,960 Speaker 2: abdicate that responsibility. They have to take it seriously. And 275 00:16:29,000 --> 00:16:31,520 Speaker 2: so I think the fact that Senator Scott went over 276 00:16:31,640 --> 00:16:34,640 Speaker 2: to the Fed's building to take a first ten look 277 00:16:34,800 --> 00:16:37,080 Speaker 2: is remarkable because I don't know when the last time 278 00:16:37,120 --> 00:16:37,800 Speaker 2: that's happened. 279 00:16:54,360 --> 00:16:59,200 Speaker 1: There's this constant establishment mantra that the FED has to 280 00:16:59,200 --> 00:17:03,240 Speaker 1: remain independent, that the FED is sakrasanct that have mere 281 00:17:03,360 --> 00:17:07,520 Speaker 1: politicians starting to question the FED threatens the very heart 282 00:17:07,560 --> 00:17:09,840 Speaker 1: of our monetary system. And to me, it was always 283 00:17:09,880 --> 00:17:13,560 Speaker 1: amazing that the FED was somehow on a pedestal you. 284 00:17:13,560 --> 00:17:16,600 Speaker 2: May remember this book. Alan Greenspan was referred to as 285 00:17:16,640 --> 00:17:18,679 Speaker 2: the High Priest of the Temple and the book was 286 00:17:18,680 --> 00:17:21,680 Speaker 2: called Secrets of the Temple. And when Alan Greenspan would 287 00:17:21,720 --> 00:17:24,199 Speaker 2: speak to Congress, there was a point where a senator 288 00:17:24,240 --> 00:17:29,040 Speaker 2: asked him a question a hearing and Alan Greenspin said, sorry, Senator, 289 00:17:29,080 --> 00:17:30,960 Speaker 2: that's not a well framed question. I'm not going to 290 00:17:31,000 --> 00:17:34,399 Speaker 2: answer that, And the senator is kind of embarrassed, almost 291 00:17:34,440 --> 00:17:36,880 Speaker 2: like a pupil in your classroom. I and you slapped 292 00:17:36,880 --> 00:17:40,800 Speaker 2: the wrist. Now, Alan Greenspan was the maestro. He was 293 00:17:40,840 --> 00:17:43,600 Speaker 2: there for twenty years this chair. In the end, I 294 00:17:43,600 --> 00:17:47,520 Speaker 2: think people realized that actually he didn't get things perfect, 295 00:17:47,920 --> 00:17:50,280 Speaker 2: that some of the decisions that Fed made during the 296 00:17:50,359 --> 00:17:53,600 Speaker 2: nineties and early two thousands were partly responsible for the 297 00:17:53,600 --> 00:17:56,600 Speaker 2: financial crisis that we had. But the main point is 298 00:17:57,119 --> 00:18:03,560 Speaker 2: that Congress was very deferential to green Spain. But Roger Ferguson, 299 00:18:03,640 --> 00:18:06,320 Speaker 2: Alice Revlin and Ton Kom were the vice chairs during 300 00:18:06,320 --> 00:18:09,480 Speaker 2: that period, being very frugal and so the extent to 301 00:18:09,520 --> 00:18:13,080 Speaker 2: which Congress had questions, they were questions about monte policy 302 00:18:13,480 --> 00:18:17,280 Speaker 2: and banking supervision, which is the fed's two key responsibilities. 303 00:18:17,840 --> 00:18:20,439 Speaker 2: There were no questions or concerns about the buildings or 304 00:18:20,480 --> 00:18:22,800 Speaker 2: the staff, or the payrolls, or the salaries or any 305 00:18:22,840 --> 00:18:26,520 Speaker 2: of that, because it was very carefully managed and very frugal. 306 00:18:27,400 --> 00:18:30,840 Speaker 1: So when you talk about frugality, though the salaries of 307 00:18:30,880 --> 00:18:33,879 Speaker 1: the senior staff of the Federal Board exceed those of 308 00:18:33,960 --> 00:18:38,000 Speaker 1: any Supreme Court justice, the Fed Bank President's salaries are 309 00:18:38,160 --> 00:18:41,600 Speaker 1: higher than the salary of the Presidented States and nearly 310 00:18:41,680 --> 00:18:44,640 Speaker 1: twice as high as the Secretor of the Treasury. Now, 311 00:18:44,640 --> 00:18:48,200 Speaker 1: if you're getting that kind of a salary, frugality doesn't 312 00:18:48,240 --> 00:18:51,480 Speaker 1: necessarily grow out of the size of your bank account. 313 00:18:51,840 --> 00:18:54,800 Speaker 2: Well, I think the worst case here, really, And there 314 00:18:54,960 --> 00:18:57,359 Speaker 2: was a Senate hearing about this. It wasn't the Senate 315 00:18:57,359 --> 00:19:00,560 Speaker 2: Banking Committee. It was a subcommittee in twenty twenty three. 316 00:19:01,440 --> 00:19:04,240 Speaker 2: Give Senator Elizabeth Warren some credit here because I think 317 00:19:04,280 --> 00:19:06,399 Speaker 2: she was the head of that subcommittee at the time. 318 00:19:06,880 --> 00:19:10,840 Speaker 2: They brought in the Fed Inspector General and they asked him, 319 00:19:11,240 --> 00:19:13,800 Speaker 2: is it true that you're being paid three hundred eighty 320 00:19:13,840 --> 00:19:16,680 Speaker 2: eight thousand dollars a year and this is two years ago, 321 00:19:17,760 --> 00:19:20,919 Speaker 2: and he said yes, of course, he said, that's the 322 00:19:21,040 --> 00:19:23,840 Speaker 2: average salary of all my peers who are the heads 323 00:19:23,880 --> 00:19:27,040 Speaker 2: of the other departments at the Federal Reserve Board three 324 00:19:27,160 --> 00:19:31,320 Speaker 2: hundred and eighty eight thousand dollars. Now, with practical certainty, 325 00:19:31,359 --> 00:19:34,199 Speaker 2: we can say that all of those department heads at 326 00:19:34,240 --> 00:19:37,359 Speaker 2: the Federal Reserve Board are now paid more than the 327 00:19:37,400 --> 00:19:42,240 Speaker 2: Presidented States. The COO, the CFO, the Chief Legal Counsel, 328 00:19:43,000 --> 00:19:47,320 Speaker 2: and the Inspector General are paid more than the Presidented States. Now, 329 00:19:47,440 --> 00:19:50,560 Speaker 2: I think it's fair to say, you know, are we 330 00:19:50,640 --> 00:19:52,840 Speaker 2: gang what we're paying for? Right? You say, well, I've 331 00:19:52,920 --> 00:19:56,560 Speaker 2: paid higher price, you know, to get more quality. But 332 00:19:56,600 --> 00:19:59,080 Speaker 2: the fact of the matter is that the Inspector General 333 00:19:59,240 --> 00:20:02,600 Speaker 2: of the Fed, who is supposed to be reporting to 334 00:20:02,720 --> 00:20:07,840 Speaker 2: Congress about everything that may be relevant, did not write 335 00:20:07,840 --> 00:20:11,479 Speaker 2: a single report to Congress in the last five years 336 00:20:11,560 --> 00:20:16,280 Speaker 2: about the design or cost of the building upgrades. There 337 00:20:16,280 --> 00:20:19,639 Speaker 2: were a couple of reports about how the contract process worked, 338 00:20:19,640 --> 00:20:23,959 Speaker 2: but nothing about the three billion dollar design, nothing about 339 00:20:24,000 --> 00:20:27,320 Speaker 2: the glass atriums, nothing about the rooftop gardens, nothing about 340 00:20:27,359 --> 00:20:30,640 Speaker 2: the underground parking garage, nothing about the concourse level. All 341 00:20:30,680 --> 00:20:33,720 Speaker 2: these cost drivers that have led to it being more 342 00:20:33,840 --> 00:20:37,359 Speaker 2: expensive than versus Palace, and there's nothing from the ig 343 00:20:37,560 --> 00:20:40,879 Speaker 2: srec Okay, but we're paying this person four hundred thousand 344 00:20:40,920 --> 00:20:43,520 Speaker 2: dollars a year, four hundred and twenty thousand dollars a year. Well, 345 00:20:43,520 --> 00:20:45,119 Speaker 2: are we king for it? And I think that's a 346 00:20:45,280 --> 00:20:47,720 Speaker 2: legitimate question that Congress should be asking. 347 00:20:48,320 --> 00:20:50,760 Speaker 1: When you think about it, you said it very well 348 00:20:50,760 --> 00:20:53,240 Speaker 1: earlier that you kind of felt like you in a 349 00:20:53,280 --> 00:20:56,920 Speaker 1: beautiful building when you were working there. I mean, it's 350 00:20:56,960 --> 00:21:00,800 Speaker 1: one of the most magnificent buildings in Washington. How could 351 00:21:00,800 --> 00:21:07,600 Speaker 1: they conceptualize, given the current deficit and everything else, spending 352 00:21:08,000 --> 00:21:12,520 Speaker 1: three point four billion dollars that just strikes me so 353 00:21:12,720 --> 00:21:15,240 Speaker 1: arrogant and so out of touch with the American people. 354 00:21:15,359 --> 00:21:15,960 Speaker 1: It's crazy. 355 00:21:16,960 --> 00:21:20,280 Speaker 2: I think that point. And by the way, that was 356 00:21:20,320 --> 00:21:22,840 Speaker 2: a point that Senator Tim Scott in the Senate Banking 357 00:21:22,880 --> 00:21:25,080 Speaker 2: Committee made in a letter that they sent to Chair 358 00:21:25,160 --> 00:21:28,920 Speaker 2: Powell about a month ago. They said, these are amenities 359 00:21:28,960 --> 00:21:32,440 Speaker 2: that the average American could never even dream of. So 360 00:21:32,600 --> 00:21:36,679 Speaker 2: you're talking about roughly a total of two thousand staff 361 00:21:36,720 --> 00:21:39,200 Speaker 2: who are working in these two buildings that they're doing 362 00:21:39,240 --> 00:21:41,560 Speaker 2: the major part of the upgrade. There's a third building 363 00:21:41,600 --> 00:21:44,679 Speaker 2: across the street. They've spent five hundred million dollars on 364 00:21:44,760 --> 00:21:48,160 Speaker 2: that one. For five hundred employees. And there's a fourth 365 00:21:48,200 --> 00:21:50,359 Speaker 2: building down the street from there that they were going 366 00:21:50,400 --> 00:21:52,719 Speaker 2: to spend five hundred million. Now that's been put on hold. 367 00:21:52,800 --> 00:21:55,240 Speaker 2: Two and a half billion dollars for two buildings for 368 00:21:55,800 --> 00:21:59,520 Speaker 2: eighteen hundred staff. It just mind boggling, as you said. 369 00:22:00,400 --> 00:22:03,480 Speaker 2: But because the FED is so insulated, they're so insular, 370 00:22:03,520 --> 00:22:07,760 Speaker 2: there's no external reviews. The IG works for the FED chair, 371 00:22:08,480 --> 00:22:11,120 Speaker 2: so you can imagine a conversation. We can only imagine. 372 00:22:11,240 --> 00:22:14,520 Speaker 2: There's a public record about it. But the IG could 373 00:22:14,560 --> 00:22:17,320 Speaker 2: have gone to the Federal Reserve Chair in twenty twenty 374 00:22:17,440 --> 00:22:19,760 Speaker 2: or twenty twenty one, or twenty twenty two or twenty 375 00:22:19,800 --> 00:22:22,800 Speaker 2: twenty three and said, I'm really concerned here that this 376 00:22:22,880 --> 00:22:24,920 Speaker 2: is going off the rails, that this is going to 377 00:22:24,960 --> 00:22:28,760 Speaker 2: cause problems for the Federal Reserve. And the FED chair says, sorry, 378 00:22:28,760 --> 00:22:30,160 Speaker 2: you work for me. I don't want you to write 379 00:22:30,160 --> 00:22:32,240 Speaker 2: anything about this. I don't want you to talk about it. 380 00:22:32,240 --> 00:22:35,439 Speaker 2: It just off the table. And I think that was 381 00:22:35,440 --> 00:22:38,119 Speaker 2: a big mistake. I think the Federal Reserve has to 382 00:22:38,160 --> 00:22:42,040 Speaker 2: be accountable. This is public money, and they can't build 383 00:22:42,080 --> 00:22:46,280 Speaker 2: a palace without getting some kind of permission at least 384 00:22:46,320 --> 00:22:50,040 Speaker 2: informal permission from Congress, because Congress is the Fed's boss. 385 00:22:50,600 --> 00:22:53,359 Speaker 2: We're back again to this question of independence. The FED 386 00:22:53,440 --> 00:22:56,440 Speaker 2: can have independence in setting the Federal funds rate every 387 00:22:56,440 --> 00:23:01,000 Speaker 2: six weeks. The founders of the Constitution, the founders of 388 00:23:01,040 --> 00:23:04,119 Speaker 2: the Federal Reserve in nineteen thirteen, the members of Congress 389 00:23:04,119 --> 00:23:07,120 Speaker 2: who created the Matre Policy Committee in the thirties never 390 00:23:07,359 --> 00:23:10,720 Speaker 2: imagined the FED would use that authority to build a palace. 391 00:23:11,520 --> 00:23:13,199 Speaker 1: I mean, there's another part of all this, which is 392 00:23:13,920 --> 00:23:17,760 Speaker 1: we focus a lot on the Fed setting interest rates. 393 00:23:17,800 --> 00:23:22,159 Speaker 1: But isn't it also true that if the bond market 394 00:23:22,359 --> 00:23:25,240 Speaker 1: doesn't respond to the interest rates, in in fact, the 395 00:23:25,280 --> 00:23:27,080 Speaker 1: bond market sets its own interest rate. 396 00:23:28,160 --> 00:23:31,560 Speaker 2: That's a very deep question you're asking. The normal way 397 00:23:31,600 --> 00:23:34,840 Speaker 2: the Federal Reserve has done policy over one hundred years 398 00:23:35,800 --> 00:23:39,240 Speaker 2: is in short term money markets. Let's say they're buying 399 00:23:39,280 --> 00:23:42,800 Speaker 2: treasury bills and putting out cash, and that pushes dowur 400 00:23:42,880 --> 00:23:46,879 Speaker 2: pressure on overnight ingistrates in the federal funds market and 401 00:23:47,000 --> 00:23:50,960 Speaker 2: in the treasure repo markets and other short term money markets. 402 00:23:51,720 --> 00:23:55,680 Speaker 2: What determines longer term interistrates is expectations about where those 403 00:23:55,680 --> 00:23:58,640 Speaker 2: short rates are going to go. That's why there's been 404 00:23:58,640 --> 00:24:01,720 Speaker 2: a long understanding for three or four decades now, at 405 00:24:01,840 --> 00:24:05,720 Speaker 2: least prey close to half a century now that the 406 00:24:05,760 --> 00:24:08,960 Speaker 2: Fed strategy is critical. It's not just about what the 407 00:24:09,000 --> 00:24:12,360 Speaker 2: Fed's doing to the current six weeks for the overnight rate. 408 00:24:12,920 --> 00:24:15,640 Speaker 2: The strategy is what influences the medium and longer term 409 00:24:15,680 --> 00:24:21,080 Speaker 2: interist rates because market participants, investors, businesses are forming expectations, well, 410 00:24:21,119 --> 00:24:23,800 Speaker 2: where's the interest rates going to be next year? Where 411 00:24:23,840 --> 00:24:26,800 Speaker 2: they're going to be in five years or ten, and 412 00:24:26,840 --> 00:24:29,159 Speaker 2: so the critical role of the Federal Reserve has to 413 00:24:29,240 --> 00:24:32,359 Speaker 2: play is to help the public and help markets, and 414 00:24:32,400 --> 00:24:37,040 Speaker 2: help Congress understand what's our plan and what's our contingency plans. 415 00:24:37,720 --> 00:24:39,720 Speaker 2: And a big part of the failure of the FED 416 00:24:39,880 --> 00:24:43,800 Speaker 2: in recent years is not just the buildings, and it's 417 00:24:43,840 --> 00:24:47,040 Speaker 2: not even just the trillion dollar mismanage of the balance sheet. 418 00:24:47,119 --> 00:24:50,159 Speaker 2: It's the fact that they have no strategy. We literally 419 00:24:50,200 --> 00:24:52,840 Speaker 2: cannot understand. I'm going to put this on the table here. Now, 420 00:24:53,440 --> 00:24:56,199 Speaker 2: why did the Federal Reserve make an emergency cut of 421 00:24:56,280 --> 00:24:59,800 Speaker 2: half a percentage point last September, a few weeks before 422 00:24:59,840 --> 00:25:04,160 Speaker 2: the presidential election, and now this week with employment data 423 00:25:04,200 --> 00:25:07,920 Speaker 2: coming in pretty bad, they're not even considering the possibility 424 00:25:07,920 --> 00:25:11,320 Speaker 2: of making a cut at all. I think the President 425 00:25:11,400 --> 00:25:13,880 Speaker 2: spoke about this. I think it's fair to say this 426 00:25:13,960 --> 00:25:17,960 Speaker 2: is monetary malpractice. The FED is a team of physicians. 427 00:25:19,200 --> 00:25:22,679 Speaker 2: The economy is the patient, and the FED owes it 428 00:25:22,720 --> 00:25:26,080 Speaker 2: to the patient and the patient's family to give a 429 00:25:26,119 --> 00:25:28,960 Speaker 2: clear explanation. What are we doing here, why are we 430 00:25:29,080 --> 00:25:31,639 Speaker 2: doing it? What's our plans, what's our conditions and planes? 431 00:25:31,680 --> 00:25:44,000 Speaker 2: And that's just been missing. 432 00:25:48,320 --> 00:25:52,320 Speaker 1: Sounds to me like somehow there was a dramatic drop 433 00:25:53,760 --> 00:25:57,320 Speaker 1: in effective leadership over the last ten to fifteen years. 434 00:25:57,359 --> 00:25:59,480 Speaker 1: I think back to my own career, which in many 435 00:25:59,480 --> 00:26:02,199 Speaker 1: ways I've got looked at the Congress when Paul Voker 436 00:26:02,320 --> 00:26:05,640 Speaker 1: was chairman, and he was a very strong, very compelling 437 00:26:05,720 --> 00:26:10,320 Speaker 1: chairman dealing with a huge problem and doing it very successfully. 438 00:26:10,840 --> 00:26:14,159 Speaker 1: Favnan Alan Greenspan for probably a half century. I mean, 439 00:26:14,200 --> 00:26:18,360 Speaker 1: these were very competent, very thoughtful figures who were sort 440 00:26:18,359 --> 00:26:20,840 Speaker 1: of naturally world figures, because if you want to be 441 00:26:20,880 --> 00:26:23,040 Speaker 1: at the FED, you're linked into all the money around 442 00:26:23,080 --> 00:26:26,399 Speaker 1: the whole planet. What has happened? Why are we just 443 00:26:26,400 --> 00:26:30,960 Speaker 1: suffering through the bureaucratization where the general competence level declines 444 00:26:31,000 --> 00:26:34,600 Speaker 1: in the sense of how the world works just gets weaker, 445 00:26:34,680 --> 00:26:35,399 Speaker 1: or what's going on? 446 00:26:36,480 --> 00:26:38,840 Speaker 2: How did the constage other There has to be accountability 447 00:26:38,880 --> 00:26:43,560 Speaker 2: to the public. Now, for the Federal Reserve, the idea 448 00:26:43,840 --> 00:26:47,120 Speaker 2: was the Congress is going to delegate its own power 449 00:26:47,320 --> 00:26:51,159 Speaker 2: to regulate the value money to this independent agency, and 450 00:26:51,240 --> 00:26:54,639 Speaker 2: its intention was not to delegate it to a single person. 451 00:26:55,600 --> 00:26:58,239 Speaker 2: The design in the Federal Reserve Act and in the 452 00:26:58,560 --> 00:27:02,359 Speaker 2: amendments in nineteen thirty was this is supposed to be 453 00:27:02,359 --> 00:27:05,520 Speaker 2: a board, a commission of experts, like the Supreme Court, 454 00:27:06,000 --> 00:27:11,399 Speaker 2: with debates and descents. Sometimes the chair might be wrong, 455 00:27:11,760 --> 00:27:14,760 Speaker 2: and maybe the chair doesn't have a clear view of things, 456 00:27:14,840 --> 00:27:18,240 Speaker 2: and other people do and there's an open debate about it. 457 00:27:19,280 --> 00:27:22,159 Speaker 2: I think the real problem here, the most obvious problem 458 00:27:22,200 --> 00:27:25,240 Speaker 2: with the Fed is not the buildings, and it's not 459 00:27:25,560 --> 00:27:28,760 Speaker 2: the one trillion dollar ballance sheet. The most obvious problem 460 00:27:28,840 --> 00:27:30,760 Speaker 2: is the fact that we went through the year twenty 461 00:27:30,800 --> 00:27:37,080 Speaker 2: twenty one with no dissenting votes, zero eight meetings, twelve 462 00:27:37,119 --> 00:27:41,280 Speaker 2: people voting every meeting, and zero descents. Almost one hundred 463 00:27:41,359 --> 00:27:44,240 Speaker 2: votes cast and zero descents. It's not the Supreme Court. 464 00:27:45,600 --> 00:27:47,560 Speaker 2: This is an autocracy. It's a monarchy. 465 00:27:48,480 --> 00:27:51,760 Speaker 1: These just people who are so bought into the culture 466 00:27:52,400 --> 00:27:56,639 Speaker 1: of the funeral Reserve chairman that they just can't break out. 467 00:27:57,280 --> 00:27:59,639 Speaker 2: These issues are complex. Wheny ever you talk about it 468 00:27:59,680 --> 00:28:02,919 Speaker 2: is usual culture. Why do people do things that they do? 469 00:28:03,000 --> 00:28:06,439 Speaker 2: You know, someone new comes in and they're kind of 470 00:28:06,480 --> 00:28:09,719 Speaker 2: told what this is how we do things here, and 471 00:28:09,760 --> 00:28:11,960 Speaker 2: if you don't follow the way we do things here, 472 00:28:12,320 --> 00:28:16,200 Speaker 2: we're going to evict you. The FED chair does control 473 00:28:16,280 --> 00:28:19,800 Speaker 2: the board's committees. The FED chair controls the budgets, the 474 00:28:19,800 --> 00:28:23,800 Speaker 2: FED chair controls the staff, and the FED chair can 475 00:28:23,920 --> 00:28:27,320 Speaker 2: make it very unpleasant for someone in your time, you 476 00:28:27,400 --> 00:28:30,159 Speaker 2: might remember Alan Blinder came to the FED. He was 477 00:28:30,160 --> 00:28:32,679 Speaker 2: appointed by Bill Clinton and he only stayed for about 478 00:28:32,800 --> 00:28:36,600 Speaker 2: fifteen months. It was really clear that Alan Blinder was 479 00:28:36,600 --> 00:28:39,400 Speaker 2: not welcome and so he left. 480 00:28:39,600 --> 00:28:40,760 Speaker 1: So it just froze him out. 481 00:28:41,120 --> 00:28:44,520 Speaker 2: Yes, essentially, Yes, a lot of us never been reported, 482 00:28:44,560 --> 00:28:47,000 Speaker 2: but people have never asked, well, how come Alan Blinder 483 00:28:47,040 --> 00:28:49,360 Speaker 2: stay for such a short period. He was on leave 484 00:28:49,400 --> 00:28:52,400 Speaker 2: from Princeton, so of course he went back to being 485 00:28:52,400 --> 00:28:54,640 Speaker 2: a professor of Princeton. He's been there ever since. But 486 00:28:55,120 --> 00:28:57,960 Speaker 2: why didn't he stay? And I think the answer is, 487 00:28:58,000 --> 00:29:01,280 Speaker 2: as you say, essentially that al Green's was not happy 488 00:29:01,320 --> 00:29:03,240 Speaker 2: with some of the things that al Blinder was talking 489 00:29:03,280 --> 00:29:06,000 Speaker 2: about and doing, and froze him out, and then that 490 00:29:06,120 --> 00:29:10,840 Speaker 2: created a precedent for everyone who followed. Congress's intention was 491 00:29:10,880 --> 00:29:13,240 Speaker 2: not to have a dictator at the FED. It was 492 00:29:13,280 --> 00:29:14,760 Speaker 2: to have a board and a commission. 493 00:29:15,600 --> 00:29:17,800 Speaker 1: What do you think should be done in the inter future? 494 00:29:18,760 --> 00:29:22,640 Speaker 2: Well, number one, the FED should have a presidentially appointed 495 00:29:22,680 --> 00:29:26,600 Speaker 2: Inspector General who's confirmed by the Senate. Every other major 496 00:29:26,640 --> 00:29:31,640 Speaker 2: federal agency has it. The FED got exempted in nineteen 497 00:29:31,680 --> 00:29:35,480 Speaker 2: seventy eight when Congress established the Inspector General's. FED said, oh, 498 00:29:35,560 --> 00:29:37,720 Speaker 2: we don't need that. We're small, we're simple, we don't 499 00:29:37,760 --> 00:29:41,160 Speaker 2: have any risks, we're frugal. And so Congress said, okay, 500 00:29:41,200 --> 00:29:43,720 Speaker 2: you can have an inspector General who's your own employee, 501 00:29:43,720 --> 00:29:47,000 Speaker 2: who reports to your FED chair. And I think that 502 00:29:47,160 --> 00:29:50,400 Speaker 2: was not unreasonable at the time, under the era of 503 00:29:50,440 --> 00:29:53,480 Speaker 2: Alice Rivlin and Roger Ferguson and Donald Cohne, that was 504 00:29:53,520 --> 00:29:56,400 Speaker 2: not an unreasonable decision. But now it's clear the FED 505 00:29:56,480 --> 00:30:01,720 Speaker 2: has to have a fully independent ig by the way, nonpartisan. 506 00:30:02,200 --> 00:30:05,760 Speaker 2: So Senator Rick Scott from Florida and Senator Elizabeth Warren 507 00:30:05,760 --> 00:30:09,160 Speaker 2: from Massachusetts, opposite sides of the aisle. They disagree on 508 00:30:09,200 --> 00:30:10,920 Speaker 2: lots of other things, but the two of them have 509 00:30:11,040 --> 00:30:15,200 Speaker 2: co sponsored a bill to have a presidentially appointed ig 510 00:30:15,520 --> 00:30:18,880 Speaker 2: at the Federal Reserve, and Congress could pass that instantly. 511 00:30:20,000 --> 00:30:22,640 Speaker 2: Number two, the Photo Reserve should be brought into the 512 00:30:22,680 --> 00:30:26,400 Speaker 2: federal budget, even if they're self funded like se see. 513 00:30:26,720 --> 00:30:29,280 Speaker 2: Their budget should be totally transparent, and Congress should have 514 00:30:29,360 --> 00:30:32,560 Speaker 2: the opportunity to review it every year and ask questions. 515 00:30:33,000 --> 00:30:35,720 Speaker 2: We're not just talking about next year, but next decade 516 00:30:35,760 --> 00:30:38,640 Speaker 2: or two decades from now, something else comes up. Maybe 517 00:30:38,640 --> 00:30:41,720 Speaker 2: it's not Palace of Versailles. Imagine the FED decided that 518 00:30:41,840 --> 00:30:45,840 Speaker 2: wanted to have its own golf course in the Nassas. Okay, okay, 519 00:30:46,200 --> 00:30:48,480 Speaker 2: well you know they should have to go to Congress 520 00:30:48,560 --> 00:30:51,600 Speaker 2: and ask It shouldn't just be up to the FED 521 00:30:51,720 --> 00:30:53,840 Speaker 2: chair to say, oh, I love golf and I really 522 00:30:53,880 --> 00:30:55,560 Speaker 2: want to have a golf course, and you know I 523 00:30:55,560 --> 00:30:57,720 Speaker 2: want to be able to play out there with my colleagues. 524 00:30:58,080 --> 00:30:59,160 Speaker 2: It's public funds. 525 00:30:59,640 --> 00:31:03,080 Speaker 1: Thank you. You'll make one of the most devastating critiques 526 00:31:03,600 --> 00:31:07,160 Speaker 1: of this Entara fiasco, which is if they showed up 527 00:31:07,160 --> 00:31:10,440 Speaker 1: in Congress with a three and a half billion dollar proposal. 528 00:31:11,280 --> 00:31:14,520 Speaker 1: They'd have been laughed out of the building because it's crazy. 529 00:31:15,440 --> 00:31:18,120 Speaker 2: You have to ask the question why, and I think 530 00:31:18,200 --> 00:31:20,560 Speaker 2: what has started happening right away. And if they'd had 531 00:31:20,600 --> 00:31:25,160 Speaker 2: an independent Inspector General instead of an employee, the IG 532 00:31:25,320 --> 00:31:27,080 Speaker 2: would have said, wait a minute, here, this is going 533 00:31:27,160 --> 00:31:30,520 Speaker 2: to be the most expensive underground parking garage in the world. 534 00:31:31,480 --> 00:31:34,240 Speaker 2: Think about it. You're building an underground parking garage right 535 00:31:34,280 --> 00:31:35,960 Speaker 2: next to the title base and in the middle of 536 00:31:35,960 --> 00:31:40,479 Speaker 2: a swamp. It's extremely expensive to do it. Let's ransom 537 00:31:40,560 --> 00:31:44,480 Speaker 2: space at the nearby commercial garage. They're built one above ground. Okay, 538 00:31:44,480 --> 00:31:47,720 Speaker 2: but this is totally insane. Same with the glass atriums. 539 00:31:48,240 --> 00:31:53,280 Speaker 2: Adding a glass atrium to historic buildings is phenomenally expensive 540 00:31:54,200 --> 00:31:57,200 Speaker 2: and defence plans, the architects engineers are really proud, like, 541 00:31:57,240 --> 00:31:59,200 Speaker 2: this is going to be really challenging, but we can 542 00:31:59,280 --> 00:32:01,960 Speaker 2: do it for a billion dollars. If you're willing to 543 00:32:01,960 --> 00:32:04,680 Speaker 2: pay us a billion dollars, we can add glass atriums 544 00:32:04,680 --> 00:32:06,960 Speaker 2: to these buildings. But this is where I think Congress 545 00:32:06,960 --> 00:32:10,400 Speaker 2: would say, no, these are public funds. You cannot use 546 00:32:10,440 --> 00:32:14,960 Speaker 2: them to build expensive glass atriums. Okay, you can repaint 547 00:32:14,960 --> 00:32:18,680 Speaker 2: your walls if you find asbestos in some stealed glass windows, 548 00:32:18,680 --> 00:32:21,600 Speaker 2: which by the way, they did, and it takes probably 549 00:32:21,680 --> 00:32:25,640 Speaker 2: five hundred thousand dollars to remove the asbestos from those 550 00:32:25,680 --> 00:32:29,280 Speaker 2: glass windows. Congress is okay, you can use five thousand 551 00:32:29,280 --> 00:32:31,600 Speaker 2: dollars to get rid of the last bits of asbesos 552 00:32:31,920 --> 00:32:33,920 Speaker 2: from the building that have been there for one hundred years. 553 00:32:34,160 --> 00:32:37,680 Speaker 2: The problem with the three billion is most of it 554 00:32:37,720 --> 00:32:40,160 Speaker 2: is for amenities that Americans would never dream of. And 555 00:32:40,200 --> 00:32:42,600 Speaker 2: that was what Senator Tim Scott said in the letter 556 00:32:42,720 --> 00:32:43,800 Speaker 2: to Powell. 557 00:32:43,960 --> 00:32:47,680 Speaker 1: When you talk about amenities, I'm not sure how some 558 00:32:47,840 --> 00:32:52,800 Speaker 1: of these things for any normal American could be described 559 00:32:52,800 --> 00:32:56,600 Speaker 1: as an amenity. I mean, it's so over the top. 560 00:32:57,760 --> 00:33:01,080 Speaker 2: I worked in that building for most of the twenty 561 00:33:01,160 --> 00:33:03,160 Speaker 2: years I was at the FED. There was a couple 562 00:33:03,120 --> 00:33:05,200 Speaker 2: of years I was across the street. In six months, 563 00:33:05,200 --> 00:33:08,160 Speaker 2: I was down the street while they were doing the renovation. Okay, 564 00:33:08,320 --> 00:33:12,600 Speaker 2: but it is a beautiful, spectacular building. It didn't need 565 00:33:12,680 --> 00:33:15,560 Speaker 2: glass atriums, it didn't have to have the two sides 566 00:33:15,560 --> 00:33:18,680 Speaker 2: and closed. The courtyards are now going to have skylights. 567 00:33:18,760 --> 00:33:21,920 Speaker 2: It'll be spectacular like a palace. But the documents of 568 00:33:21,960 --> 00:33:25,720 Speaker 2: the fence plans say is this will provide a place 569 00:33:25,760 --> 00:33:30,880 Speaker 2: of respite for building users, a place of respite. And 570 00:33:30,920 --> 00:33:34,320 Speaker 2: the irony of this, which is acute, is the Federal 571 00:33:34,320 --> 00:33:37,840 Speaker 2: Reserve building is right across the street from the National Mall. 572 00:33:38,200 --> 00:33:41,080 Speaker 2: When I was there, we would walk across the street 573 00:33:41,160 --> 00:33:43,600 Speaker 2: and walk around the Duck Pond, or we walk over 574 00:33:43,720 --> 00:33:46,120 Speaker 2: to the World War Two Memorial or even the Lincoln 575 00:33:46,160 --> 00:33:49,320 Speaker 2: Memorials only a few hundred yards away. And so do 576 00:33:49,360 --> 00:33:52,840 Speaker 2: you really have to have a glass atrium in the 577 00:33:52,880 --> 00:33:57,080 Speaker 2: courtyard of the building to provide respite for building users. 578 00:33:57,440 --> 00:34:00,520 Speaker 1: You've got to cut down the arrogance of an institution 579 00:34:00,640 --> 00:34:02,720 Speaker 1: that thinks is totally out of control. I agree with 580 00:34:02,760 --> 00:34:06,040 Speaker 1: almost all your other recommendations about having a truly independent 581 00:34:06,080 --> 00:34:10,279 Speaker 1: Inspector General, having a regular audit, having all major expenditures 582 00:34:10,480 --> 00:34:14,279 Speaker 1: actually go through the Congress. This institution has to come 583 00:34:14,280 --> 00:34:17,840 Speaker 1: back to being an institution of the American people, not 584 00:34:17,920 --> 00:34:19,799 Speaker 1: an institution of a handful of elitists. 585 00:34:20,320 --> 00:34:23,200 Speaker 2: Again, I want to just recommend here, because the FED 586 00:34:23,360 --> 00:34:27,520 Speaker 2: is complex, you need a Blue Ribbon commission on the governance. 587 00:34:28,600 --> 00:34:31,160 Speaker 2: It should be a board. It should be a commission 588 00:34:31,560 --> 00:34:34,839 Speaker 2: like the Supreme Court, the chief Justice is not always right. 589 00:34:35,680 --> 00:34:38,360 Speaker 2: It should be first among equals, and so it's not 590 00:34:38,560 --> 00:34:42,080 Speaker 2: that hard to fix. For example, Congress could change a 591 00:34:42,120 --> 00:34:44,719 Speaker 2: few words in the Federal Reserve Act to make the 592 00:34:44,800 --> 00:34:48,920 Speaker 2: staff report to the entire board, all seven of them. 593 00:34:49,440 --> 00:34:52,040 Speaker 2: There'd still be a chair who would moderate the meetings 594 00:34:52,080 --> 00:34:54,560 Speaker 2: and set the agenda, okay, but the staff would report 595 00:34:54,600 --> 00:34:57,040 Speaker 2: to all seven board members. It would get rid of 596 00:34:57,120 --> 00:35:00,560 Speaker 2: the monarchy, it would get rid of the autocracy. It 597 00:35:00,560 --> 00:35:03,040 Speaker 2: would make the chair first among equals. And then when 598 00:35:03,080 --> 00:35:05,600 Speaker 2: there were debates, like with the Supreme Court, we wouldn't 599 00:35:05,640 --> 00:35:08,320 Speaker 2: just see the same justice over and over and over again. 600 00:35:08,760 --> 00:35:11,200 Speaker 2: It would depend on which one's writing the opinion and 601 00:35:11,239 --> 00:35:13,440 Speaker 2: which ones are in the minority, which inventory That's the 602 00:35:13,440 --> 00:35:15,040 Speaker 2: way it should be at the Federal Reserve. 603 00:35:15,680 --> 00:35:17,879 Speaker 1: Well, I want to thank you for joining me. We're 604 00:35:17,920 --> 00:35:21,280 Speaker 1: going to feature your latest policy brief. The Federal Reserve 605 00:35:21,360 --> 00:35:24,040 Speaker 1: should welcome the appointment it would have been an Inspector 606 00:35:24,080 --> 00:35:27,120 Speaker 1: General on our show page. I'm going to encourage everyone 607 00:35:27,560 --> 00:35:30,080 Speaker 1: to follow the work you're doing at Mertadis dot org 608 00:35:30,520 --> 00:35:34,440 Speaker 1: or by visiting your personal website at Dartmouth dot edu 609 00:35:34,719 --> 00:35:38,719 Speaker 1: slash eleven. This has been one of the more interesting 610 00:35:38,760 --> 00:35:42,880 Speaker 1: and fascinating podcast You really have mastered this and you, 611 00:35:42,920 --> 00:35:46,920 Speaker 1: frankly have my head spinning with ideas. Well. 612 00:35:46,920 --> 00:35:50,280 Speaker 2: Great, let's talk again sometime, and I really appreciate your work. 613 00:35:50,640 --> 00:35:54,320 Speaker 2: Your podcast is important because it's moving around this legacy 614 00:35:54,400 --> 00:35:58,000 Speaker 2: media that's had this lock on public communications for many 615 00:35:58,120 --> 00:36:02,960 Speaker 2: decades and now finally the glasses broken and programs like 616 00:36:03,000 --> 00:36:06,279 Speaker 2: yours are helping the public to really understand these really 617 00:36:06,320 --> 00:36:07,680 Speaker 2: important issues. So thank you. 618 00:36:11,040 --> 00:36:13,480 Speaker 1: Thank you to my guest Andrew Levin. You can get 619 00:36:13,480 --> 00:36:16,440 Speaker 1: a link to his policy brief the Federal Reserve should 620 00:36:16,480 --> 00:36:19,600 Speaker 1: welcome the appointment of an independent inspector in general on 621 00:36:19,640 --> 00:36:22,960 Speaker 1: our show page at newtworld dot com. New World is 622 00:36:22,960 --> 00:36:27,520 Speaker 1: produced by Ginglishtree sixty at iHeartMedia. Our executive producer is 623 00:36:27,560 --> 00:36:32,520 Speaker 1: Guernsey Sloan. Our researcher is Rachel Peterson. The artwork for 624 00:36:32,560 --> 00:36:36,560 Speaker 1: the show was created by Steve Penley. Special thanks to 625 00:36:36,560 --> 00:36:39,960 Speaker 1: the team of Ginglishtree sixty. If you've been enjoying Newsworld, 626 00:36:40,200 --> 00:36:42,719 Speaker 1: I hope you'll go to Apple Podcasts and both rate 627 00:36:42,800 --> 00:36:45,640 Speaker 1: us with five stars and give us a review so 628 00:36:45,719 --> 00:36:48,920 Speaker 1: others can learn what it's all about right now. Listeners 629 00:36:48,920 --> 00:36:52,440 Speaker 1: of news World can sign up for my three freeweekly 630 00:36:52,520 --> 00:36:57,480 Speaker 1: columns at ginglishtree sixty dot com slash newsletter. I'm Newt Gingrich. 631 00:36:57,800 --> 00:36:58,759 Speaker 1: This is news World.