We’ll they’ve come down from the mountain. The Fed completed its two-day meeting this week, and they didn’t change policy. Yawn.

The economy is weak, but it’s showing signs of life. So the Fed plans to let its extraordinary support expire on schedule. How remarkable! When the Fed planned to support the commercial banks or the money market funds or the mortgage market, they somehow knew when the program wouldn’t be needed any more.

I for one am thoroughly unconvinced that the Fed and the Treasury had any such clairvoyance when they set up their auction facilities, TALF programs, PPIP sales, and quantitative easing. Instead, the Fed took emergency actions and now they’re hoping they’ll go quietly into the night.

But that’s not likely to happen. For good or ill, the Constitution vests Congress with the authority to manage the currency. The Fed’s actions poached on Congressional turf, and now Congress is pushing back.

Extraordinary audits and oversight, loss of regulatory powers, and additional reporting are just the start. The Fed’s job is going to be lot more difficult. That’s a problem. Because the risk of inflation is real. We know how poisonous it can be. And as Alan Greenspan famously noted, in 25 years as Fed Chairman, not one Congressman ever lobbied for lower inflation and higher rates–ever.

Douglas R. Tengdin, CFA
Chief Investment Officer
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