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Why Bernanke Wants to Keep Responsibility for Consumer Protection at The Fed

Updated: May 20, 2022

Why is Bernanke so keen that responsibility for consumer protection be kept at the Fed? Presumably, with millions of consumers in a negative equity position thanks to the (Fed-induced) rise and collapse of the housing bubble, it isn't because he thinks the Fed has done a good job.

Both Bernanke and Greenspan continue to claim that it is impossible to prevent bubbles. Why do they so vehemently stick to this line? Because the minute they admit that it is untrue, as it undoubtedly is, the Fed will no longer be allowed to engineer bubbles that rip off consumers and transfer wealth from poor to rich. The Fed does not exist to protect consumers. The Fed exists to service the commercial banks', to act as their banker. Putting both roles under the same roof creates the mother of all conflicts.

Retaining the role of consumer protection is important to the Fed as it means it is kept out of the hands of an agency interested in fulfilling it. Putting the Fed in charge of consumer protection is, as it always has been, like appointing Saddam Hussein president of Save the Children.

Published on The Centilliard

The views expressed in this communication are those of Peter Elston at the time of writing and are subject to change without notice. They do not constitute investment advice and whilst all reasonable efforts have been used to ensure the accuracy of the information contained in this communication, the reliability, completeness or accuracy of the content cannot be guaranteed. This communication provides information for professional use only and should not be relied upon by retail investors as the sole basis for investment.

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