Conservatives have been fighting the concept of central banking at least since Andrew Jackson abolished the Philly bank way back when. Are they really that Conservative? Read this article, and then postulate the Question that the businessmen behind this demand are not that Conservative. Business likes inflation. They like to contract huge amounts of Debt in Capitalization of enterprise, then pay back a much less-valued amount. Every central bank attempts to limit this practice by maintaining the value of the Currency, and so, Business has always opposed central bank policies. Labor should always support central bank policy, as it preserves any Savings achieved by themselves. Current Fed activity, as explained by the article, clearly outline that Business controls Fed policy; a further injury to both the dollar and Depositors who lose real value. What I worry about, and every economist should, consists of the fact that the Fed will not only begin to resemble another business player in the economy; but that it will resemble the corporate entity of Enron, with hollow assets based upon its own evaluation. It not only nullifies Fed policy, but the institution itself.
There is this Reading List to study the issue of large banks. I do not know whether putting a Cap based on percentage of GDP on bank holdings is the right method. It turns the entire effect of legislation to basically Accounting procedure, which will always lead to confusion. I would propose much simpler legislation which actually provides some protection from inflation. The basic Concern must be the expansion of leverage under the banking system, and here there is little control. A different approach might be devised.
I am just throwing this proposal out there, without much contemplation; the rationale is simply to get the large expected criticism. The later might highlight the serious areas which must be addressed. I propose that a simple law be implemented which would require that 25% of all Profits must be returned to Depositors as a percentage increase of their Deposits every year; that 25% of all Profits must be returned to Stockholders every year; and that Wages and Bonuses to Bank employees can exceed more than 25% of such Profits every year. It would leave 25% of all Profits free for business expansion; generating a simple method of bank improvement of position with least support of leverage. The Proposal may be too simplistic, but it might be the exact place to start the discussion. lgl