More power to the Fed??

President Obama came out this week with a new framework to regulate the financial system and ensure us once and for all that a " financial crisis of this magnitude will never happen again." The proposed changes give sweeping new powers to the Federal Reserve who will now act as our systemic risk regulator, carefully monitoring the markets to protect us from ourselves.

As a brief background, the Fed was created in 1913 specifically to quell recessions (called panics at the time), ensure price stability and maintain a stable financial system. Keep that in mind.

I decided to look at the history of recessions in the U.S. I used one point of reference, 1913 - the year that the Fed was chartered. Time period 1 - 1800 to 1913 and time period 2 - 1913 to present are about 100 years each, giving us a relatively equitable time frame to evaluate the performance of the Fed.

Phase 1 saw the US fall into 8 recessions. Considering that the U.S. was a fledgling nation and experienced the industrial revolution during this time, I say that 8 recessions in 113 years isn't too bad.

Since the creation of the Federal Reserve and the start of Phase 2 in 1913, the U.S. has experienced 15 recessions, including the current crisis and the Great Depression. So in the 96 years since the Fed was created, the number of recessions has doubled and we still have 17 years to go....

Interestingly, Sen. Aldrich - the chief of the National Monetary Commission and one of the original proponents of the Fed - studied central banking extensively in Europe and modeled the U.S. Federal Reserve system on the central bank in place in Germany at the time. Of course it was only a decade later when Germany's central bank, the very one championed by Aldrich and the National Monetary Commission, caused Germany to spiral into a hyperinflationary depression that left that country and its citizens in total ruin.

I prefer Phase 1. It's time to abolish the Fed.