A majority of Americans are dissatisfied with the nation’s independent central bank, saying the U.S. Federal Reserve should either be brought under tighter political control or abolished outright, a poll shows.
The Bloomberg National Poll underlines the extent to which the central bank’s standing has suffered as it has come under fire in Congress, first from Democrats for regulatory lapses before the financial crisis and then from Republicans for failing to revive an economy in which the jobless rate hovers near 10 percent. Voters from both parties have criticized the Fed’s $3.3 trillion in aid to the financial system.
“The Fed had to do extraordinary things to keep us from going into a great depression, and the public doesn’t see it this way,” said Lyle Gramley, a former Fed governor who is now senior adviser at Potomac Research Group in Washington. “The last time we had any really severe criticism of the Fed was in the early 1980s, when the Fed was pursuing this brutally tight policy to keep inflation under control.”
The survey, conducted Dec. 4-7, also shows deep skepticism, especially among Republicans, over the Fed’s Nov. 3 announcement that it would buy bonds in an attempt to bring down unemployment and prevent deflation. More than half say the purchases won’t help the economy.
The policy, known as quantitative easing, was the target of criticism in Washington and overseas. That prompted Fed Chairman Ben S. Bernanke to appear in an interview on CBS television’s “60 Minutes” program on Dec. 5 to defend his actions.
Across the Spectrum
Americans across the political spectrum say the Fed shouldn’t retain its current structure of independence. Asked if the central bank should be more accountable to Congress, left independent or abolished entirely, 39 percent said it should be held more accountable and 16 percent that it should be abolished. Only 37 percent favor the status quo.
In a previous poll, conducted Oct. 7-10, 35 percent of Americans said the Fed should be radically overhauled, while 8 percent said it should be abolished.
Republicans and independents are more likely to support ending the Fed, with 19 percent of independents, 16 percent of Republicans, and 12 percent of Democrats wanting to do away with the central bank. Among those who identify themselves as supporters of the Tea Party movement, which wants to rein in government, 21 percent want to abolish the Fed.
The Fed was founded in 1913. While Congress sets its mandate, politicians let it determine how to achieve those goals through monetary policy and allow it to resolve differences of opinion among its seven board members and 12 Reserve Bank presidents.
Republicans in Congress have taken aim at the Fed’s dual mandate to achieve both maximum employment and stable prices. Last month, two Republicans, Tennessee Senator Bob Corker and Indiana Representative Mike Pence, proposed removing the employment mandate to focus the Fed on stable prices. Corker plans to introduce legislation next year.
That legislation would amend the Humphrey-Hawkins Full Employment Act of 1978, which created the Fed’s dual mandate.
Most members of Congress haven’t taken a hard look at the Fed in decades, said Representative Paul Ryan, a Wisconsin Republican in line to head the House Budget Committee. “They’re really beginning to wake up on this,” Ryan said in an interview.
Getting Politics ‘Out’
Pence, the outgoing chairman of the House Republican Conference, said his legislation doesn’t seek to abolish or politicize the Fed.
“Getting the Fed back to its original mission on price stability is precisely how we get politics out of monetary policy,” he said this week at a monetary policy forum in Washington.
Opponents of the central bank got another boost today when Representative Ron Paul, a Texas Republican and author of “End the Fed,” was picked to head the House Financial Services subcommittee that oversees the central bank. Paul said last week he is planning a series of hearings on U.S. monetary policy and wants to increase auditing of the Fed.
Senator Jim Bunning, a Republican from Kentucky completing his second term, called for restraints on the Fed in his farewell address today.
“Public awareness of what the Fed is doing is increasing while public opinion of the Fed is falling,” Bunning said. “Congress must act to rein in Chairman Bernanke and the Fed before they destroy our currency and permanently damage our economy and the financial system.”
Bernanke, 56, made his rare appearance on a nationally broadcast news program to explain his efforts to prop up a recovery so weak that only 39,000 jobs were created last month.
“We’re not very far from the level where the economy is not self-sustaining,” he said in the interview. “It’s very close to the border. It takes about 2.5 percent growth just to keep unemployment stable, and that’s about what we’re getting.” He said it’s possible the Fed will expand its bond purchases.
The Fed has said it would buy $75 billion a month of Treasury securities through June. That caused an uproar among Republicans, including Sarah Palin, the 2008 vice presidential nominee who says she’s considering a run for president in 2012.
Palin wrote to the Wall Street Journal last month, “it’s time for us to ‘refudiate’ the notion that this dangerous experiment in printing $600 billion out of thin air, with nothing to back it up, will magically fix economic problems.”
Bernanke responded to such charges in his 60 Minutes interview, saying, “One myth that’s out there is that what we’re doing is printing money.” He added, “The money supply is not changing in any significant way.”
“The machinations of the Fed are not exactly a subject of water-cooler conversation -- until newsmakers start talking about them,” said J. Ann Selzer, president of Selzer & Co., a Des Moines, Iowa-based firm that conducted the nationwide survey. “That talk has engendered a certain skepticism among the general public, many of whom may not see how this esoteric action by the Fed will ease their own pain.”
Fifty-four percent of those surveyed say the Fed’s policy won’t help the economy, compared with 25 percent who say it will. The remainder are unsure.
One poll respondent, Kathy Lipski, 34, said, “The Fed just has too much power or too much of a monopolized view, and I believe it needs some more oversight.” Lipski, who works for Honeywell International Inc. in Chicago, added: “It’s a good thing to have a separate entity as long as they’re acting in the best interest of the American people.”
In a September poll of Bloomberg customers, investors were skeptical as well: Two in three said if the Fed were to ease monetary policy by buying bonds, it wouldn’t boost the economy, compared with one in three who were optimistic about the plan. By November, approval of the plan increased, with 41 percent optimistic and 56 percent saying it wouldn’t help.
The Standard & Poor’s 500 Index has risen 15 percent since Aug. 27, when Bernanke signaled the Fed’s willingness to begin a second round of quantitative easing during a speech in Jackson Hole, Wyoming. Investors’ expectations for inflation over the next five years have risen to 1.6 percent a year from 1.2 percent, as measured by the difference between the yields on inflation-protected and nominal bonds.
Still, the yield on 10-year Treasuries rose to 3.27 percent yesterday, the highest level since June, from 2.64 percent on the day of Bernanke’s speech.
Praising the Fed
Many observers have praised the central bank for steering the country away from the worst financial crisis in seven decades.
Fed officials “just did what they had to do to avoid a much more severe macro outcome,” said Roberto Perli, a managing director at International Strategy & Investment Group in Washington and a former Fed economist. “The Fed should quite frankly take credit for that.”
Bernanke personally is more likely to be viewed favorably than unfavorably. Thirty-four percent of respondents said they see him favorably, and 25 percent don’t. Forty-one percent said they weren’t sure.
He became chairman of the Fed in February 2006, after being appointed by President George W. Bush. He was renominated by President Barack Obama and confirmed for a second term in January 2010.
The Bloomberg National Poll is based on interviews with 1,000 U.S. adults age 18 or older and has a margin of error of plus or minus 3.1 percentage points.