Fed Friendly Economists In Panic Mode Over Ron Paul Audit Legislation

A group of Federal Reserve friendly economists have launched a petition calling on the Executive Branch and Congress to not intefere with the Federal Reserve. Here's the full text of the petition:

Open Letter to Congress and the Executive Branch

Amidst the debate over systemic regulation, the independence of U.S. monetary policy is at risk. We urge Congress and the Executive Branch to reaffirm their support for and defend the independence of the Federal Reserve System as a foundation of U.S. economic stability. There are three specific risks that must be contained.

First, central bank independence has been shown to be essential for controlling inflation. Sooner or later, the Fed will have to scale back its current unprecedented monetary accommodation. When the Federal Reserve judges it time to begin tightening monetary conditions, it must be allowed to do so without interference. Second, lender of last resort decisions should not be politicized.

Finally, calls to alter the structure or personnel selection of the Federal Reserve System easily could backfire by raising inflation expectations and borrowing costs and dimming prospects for recovery. The democratic legitimacy of the Federal Reserve System is well established by its legal mandate and by the existing appointments process. Frequent communication with the public and testimony before Congress ensure Fed accountability.

If the Federal Reserve is given new responsibilities every effort must be made to avoid compromising its ability to manage monetary policy as it sees fit.

It's hard to believe that it is actually economists that put this hazy letter together. They write:

..central bank independence has been shown to be essential for controlling inflation

Do they have any clue how much money was printed (i.e. monetary inflation) that caused the current boom/bust cycle? Do they have any clue how many dollars the Fed has printed that are being held by the Chinese, that the Chinese want to desperately get rid of?

They go on:

Second, lender of last resort decisions should not be politicized.

Is this a joke or what? Did Bernanke and Paulson not politicize the bailout process by allowing Lehman and Bear Stearns to crash, but bailed out Goldman Sachs (via AIG) to the tune of billions?

They continue:

The democratic legitimacy of the Federal Reserve System is well established by its legal mandate and by the existing appointments process. Frequent communication with the public and testimony before Congress ensure Fed accountabilityThis group is clearly afraid of an audit of the Fed. How else can they possibly claim that the Fed is now transparent?

I really fear that any audit of the Fed may be co-opted by big governemnt types, but Ron Paul is clearly on to something. The Fed and their allies appear to be in full panic mode. What are they afraid Ron Paul will discover?

For the record, here are the creators and intial signers of the document:


Ricardo Caballero, Massachusetts Institute of Technology
Kenneth French, Dartmouth College
Robert Hall, Stanford University
Anil Kashyap, University of Chicago Booth School of Business
Pete Klenow, Stanford University
Frederic Mishkin, Columbia University
Thomas Sargent, New York University
Michael Woodford, Columbia University

Here are all who have signed the document:

Name Affiliation
1 Ricardo Caballero MIT
2 Kenneth French Dartmouth College
3 Robert Hall Stanford
4 Anil Kashyap Chicago Booth
5 Pete Klenow Stanford
6 Frederic Mishkin Columbia
7 Thomas Sargent NYU
8 Michael Woodford Columbia
9 Andrew Abel Wharton School, University of Pennsylvania
10 Daron Acemoglu MIT
11 Michael Adler Columiba University
12 Yacine Ait-Sahalia Princeton University
13 Fernando Alvarez University of Chicago
14 Scott Anderson Wells Fargo & Co.
15 Cliff Asness Managing and Founding Principal, AQR Capital Management LLC
16 Paul Asquith Massachusetts Institute of Technology
17 David Backus NYU
18 Dean Baim Pepperdine University/UCLA
19 Ravi Bansal Duke University
20 David Bates University of Iowa
21 Andrew Bernard Dartmouth College
22 Richard Berner Morgan Stanley
23 George Borts Brown University
24 Scott Brown Raymond James & Associates
25 Markus K. Brunnermeier Princeton University
26 Ralph C. Bryant Brookings Institution
27 Michael Carey Calyon Securities (USA) Inc. Credit Agricole Group
28 Christopher Carroll Johns Hopkins University
29 Martin Cherkes Columbia University
30 Diego Comin Harvard University
31 Jernej Copic UCLA
32 Dora Costa UCLA
33 Steven Davis University of Chicago Booth School of Business
34 Angus Deaton Princeton University
35 Davide Debortoli University of California, San Diego
36 Eddie Dekel Northwestern University
37 Harold Demsetz UCLA
38 Scott Desposato University of California, San Diego
39 Douglas Diamond University of Chicago Booth School of Business
40 Peter Diamond MIT
41 Francis X. Diebold University of Pennsylvania
42 Avinash Dixit Princeton University
43 Darrell Duffie Stanford
44 Pierre Collin Dufresne Columbia
45 Martin Eichenbaum Northwestern University
46 Andrea Eisfeldt Northwestern University Kellogg School of Management
47 Jeffrey Ely Northwestern University
48 Eduardo Engel Yale University
49 Eugene Fama University of Chicago Booth School of Business
50 Henry Farber Princeton University
51 Roger Farmer UCLA
52 Jon Faust Center for Financial Economics, Johns Hopkins U.
53 Michael Feroli J.P.Morgan
54 Wayne Ferson U.S.C.
55 Kristin Forbes MIT-Sloan School of Management
56 Mark Gertler New York Univiersity
57 Marc Giannoni Columbia University
58 Simon Gilchrist Boston University
59 Robert J. Gordon Northwestern University
60 Roger Gordon UCSD
61 David Greenlaw Morgan Stanley
62 Gene Grossman Princeton University
63 Steffen Habermalz Northwestern University
64 James Hamilton University of California, San Diego
65 Gary Hansen UCLA
66 Robert Hansen Tuck School, Dartmouth College
67 Gordon Hanson UC San Diego
68 Milton Harris University of Chicago Booth School of Business
69 Tarek Hassan University of Chicago Booth School of Business
70 Zhiguo He Chicago Booth
71 John Heaton University of Chicago
72 D. Lee Heavner Analysis Group, Inc.
73 Christian Hellwig UCLA
74 Gailen Hite Columbia Business School
75 Yael Hochberg Kellogg School of Management, Northwestern University
76 Stuart Hoffman PNC Financial Services Group
77 Bengt Holmstrom MIT
78 Bo Honore Princeton University
79 Peter Hooper Deutsche Bank
80 Takeo Hoshi University of California, San Diego
81 Christopher House University of Michigan
82 Peter Howitt Brown University
83 Chang-tai Hsieh University of Chicago
84 Ellen Hughes-Cromwick Chief Economist, Ford Motor Company
85 John Huizinga University of Chicago Booth School of Business
86 Erik Hurst University of Chicago Booth School of Business
87 Ravi Jagannathan Kellogg School of Management, Northwestern University
88 Dana Johnson Comerica Bank
89 Karen Johnson Federal Reserve Board of Governors (retired)
90 Charles I. Jones Stanford University, Graduate School of Business
91 Paul Joskow MIT
92 Matthew Kahn UCLA
93 Juno Kang The Bank of Korea
94 Steven Kaplan University of Chicago Booth School of Business
95 Bruce Kasman J.P. Morgan Chase
96 Peter Kenen Princeton Uniiversity
97 Ralph Koijen University of Chicago Booth School of Business
98 David Kotok Chariman, Central Banking Series, Global Interdependence Center,
Philadelphia, PA.
99 Arvind Krishnamurthy Northwestern University
100 Rafael La Porta Dartmouth College
101 David Lake University of California, San Diego
102 Bruce Lehman UCSD
103 Nan Li Ohio State University
104 Hilarie Lieb Northwestern University
105 John Liew AQR Capital Management
106 Juhani Linnainmaa University of Chicago Booth School of Business
107 Andrew Lo MIT
108 Kevin Logan Dresdner Kleinwort
109 Guido Lorenzoni MIT
110 Hanno Lustig UCLA Anderson
111 Louis Maccini Johns Hopkins University
112 Burton Malkiel Princeton University
113 Eric Maskin The Institute for Advanced Study, Princeton University
114 Robert McDonald Kellogg School, Northwestern University
115 Daniel McFadden University of California, Berkeley
116 Doug McMillin Louisiana State University
117 Rajnish Mehra UC Santa Barbara
118 Robert Mellman J.P. Morgan
119 Robert Merton Harvard University
120 Laurence Meyer Macroeconomic Advisers, LLC
121 Atif Mian University of Chicago
122 Gregory Miller Suntrust Banks, Inc.
123 Robert Moffitt Johns Hopkins University
124 Stephen Morris Princeton University
125 Dale Mortensen Northwestern University
126 Giuseppe Moscarini Yale University
127 Tobias Moskowitz University of Chicago, Booth School of Business
128 Stefan Nagel Stanford
129 Maurice Obstfeld University of California, Berkeley
130 Lee Ohanian UCLA
131 Maureen O'Hara Cornell University
132 Stavros Panageas University of Chicago Booth School of Business
133 Dimitris Papanikolaou Northwestern University
134 Robert Parry President & CEO, Federal Reserve Bank of San Francisco, Retired
135 Lubos Pastor University of Chicago Booth School of Business
136 Lasse H. Pedersen NYU
137 Monika Piazzesi Stanford
138 Keith Poole University of California, San Diego
139 Giorgio Primiceri Northwestern University
140 Valerie Ramey University of California, San Diego
141 Enrichetta Ravina Columbia University
142 Esteban Rossi-Hansberg Princeton University
143 Michael Rothschild Princeton University
144 Tano Santos Columbia Business School
145 Ulrike Schaede University of California, San Diego
146 Richard Schmalensee MIT
147 Martin Schneider Stanford
148 Kermit Schoenholtz NYU Stern School of Business
149 Jay Shanken Emory
150 Robert Shiller Yale University
151 Hyun Shin Princeton University
152 Stephen Shore Johns Hopkins University
153 Costis Skiadas Northwestern University
154 Matthew Slaughter Dartmouth College
155 James F. Smith Kenan-Flagler Business School, UNC-Chapel Hill
156 Chester Spatt Carnegie Mellon University
157 James H. Stock Harvard
158 Rene Stulz The Ohio State University
159 Amir Sufi University of Chicago Booth School of Business
160 Joseph Swanson Northwestern University
161 Vefa Tarhan Loyola University Chicago
162 Edwin M. Truman Peterson Institute for International Economics
163 Harald Uhlig University of Chicago
164 Andrey Ukhov Northwestern University
165 Sergio Urzua Northwestern University
166 Chris Varvares Macroeconomic Advisers, LLC
167 Pietro Veronesi University of Chicago
168 Paul Wachtel New York University, Stern School of Business
169 Richard Walker Northwestern University
170 Mark Watson Princeton
171 Shang-jin Wei Columbia
172 David Weil Brown University
173 Pierre-Olivier Weill UCLA Economics
174 Burton Weisbrod Northwestern University
175 William Wheaton MIT
176 Michael Whinston Northwestern University
177 Mirko Wiederholt Northwestern University
178 Mark Witte Northwestern University
179 Tiemen Wouteren Johns Hopkins University
180 Jonathan Wright Johns Hopkins University
181 Wei Xiong Princeton University
182 Stanley Zin New York University