Lessons from Bernanke’s Thank You Notes

From the Politico (hat tip Bob Wenzel)

If you have the Federal Reserve’s back, there’s a good chance Ben Bernanke will notice.

He may even send you a thank you note.

In July, the Fed chairman sent letters of gratitude to five Democratic members of Congress after they delivered speeches on the House floor urging fellow lawmakers to reject the “Audit the Fed” bill authored by retiring Texas Republican Ron Paul, the central bank’s chief antagonist.

Their efforts failed to defeat the bill, but they were not in vain, at least in Bernanke’s eyes.

“While the outcome of the vote was not in doubt, your willingness to stand up for the independence of the Federal Reserve is greatly appreciated,” Bernanke wrote in the letters, which were obtained by POLITICO through a Freedom of Information Act request.

He continued, “Independence in monetary policy operations is now the norm for central banks around the world — and it would be a grave mistake were Congress to reverse the protection it provided to the Federal Reserve more than 30 years ago.”

The letters were sent to Reps. Barney Frank, Elijah Cummings, Melvin Watt, Carolyn Maloney and Steny Hoyer.

“It's not unusual for the chairman to write thank you notes to members of Congress,” said Fed spokesman David Skidmore.

Dated July 26, the notes were written the day after the House voted 327-98 to pass Paul’s bill, which would authorize the Government Accountability Office to audit how the central bank implements monetary policy.

While the Fed defends Mr. Bernanke’s thank you notes as having been “not usual”, meaning that such action may have been a tradition, bureaucratic traditionalism does not translate into moralistic actions.

The above simply exhibits how political agents operate behind the scenes to attain self-interested goals. In this case,  Bernanke tries to influence the outcome of votes of the US congress (which he failed). This also implies that such relationship works the other way around for other political du jour issues.

One can construe “conflict of interests” and “agency problems” rather than supposed “independence” from such interactions, as well as, reciprocity and horse trading as part of concession seeking approach employed by political agents from different branches of government.

This also further demystifies the highly glamorized “virtuosity” of governments (myth of good government) as the above account puts into perspective similar human frailties of those in command of the use guns and badge institutions over the populace…except of course the difference is that they can wield political power over society to feed on their caprices.