Minneapolis Fed President is taking a stab at those would like to see the Fed stripped of its bank oversight powers, saying that while the Fed made "significant mistakes," just go ahead with your plan, and it'll be the Great Recession 2.0. Sure, they didn't see the crisis coming, but hey, "the Romans used to cut up birds to make their economic forecasts" and the Fed's methods have improved "somewhat." So stop bitching people.
In a speech yesterday, Narayana Kocherlakota (pictured) reiterated that Congress and Washington need to put their shit together to address financial regulation - a sentiment that seems to be rampant these days, what with the outbursts of Volcker and Bayh to name a few. "These proposals have generated a great deal of uncertainty, for the capricious winds of politics seem to change them on a near-daily basis."
He also addressed the CRE problem (catastrophe?) that could trigger massive bank failures, which in turn, would trigger decreased lending. The job situation is not looking too good either and looking "at data on job flows is even more disturbing."
Great. So back to his first point, the situation is bleak but t improvements in the economic situation are "attributable in large part to actions taken by the Fed as it was able to undertake these actions because of expertise and information that it had acquired as a supervisor of the nation's banks."
My conclusion is that stripping the Federal Reserve of its supervisory role would needlessly put a Great Depression on the menu of possibilities for our country.