Pethokoukis: 'Ron Paul's Dumb Plan'

Auditing the Fed could hurt the economy.

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Since I've given Ron Paul a platform to speak the merits of auditing the Fed, I think it's only fair for me to link to former Cap Com blogger Jimmy P's article on why he thinks Paul's bill could damage the economy. Here's one of the key points:

Even if the result of the Fed bill is only more aggressive congressional questioning and criticism, financial markets might well fear the bank would start taking congressional wishes into account when making policy.

“If the markets and foreign investors perceive it that way,” says economist Michael Feroli of JPMorgan, “it could immediately push up borrowing costs even if the audits are only a symbolic increasing of congressional oversight of monetary policy.”

I'm going to stay agnostic on the issue of whether or not Paul's bill is a good idea. But here's my question to opponents of the bill like Jimmy P: Almost everyone recognizes that the Fed was a major contributor to the current financial crisis, because, as Jim writes, it kept interest rates down for too long. So without taking an anti-Fed approach a la Ron Paul, how could similar Fed mistakes be prevented in the future? If Greenspan could make such big mistakes, is there anyone who could possibly be "better"?