What can I say? This lady is a career bureaucrat, with her final promotion to this job happening about three years ago. While the job of "Inspector General of the Federal Reserve" sounds important, I'm not so sure that it really is. I have no idea what the "Bloomberg article" alleges, but the questioner did say that it had to do with "off balance sheet transactions". Let's not also miss the fact that the Congressman doing the questioning was clearly trying to play some "gotcha" for the purpose of creating some sound-bites for his own benefit. He did, of course--we all looked at the video on YouTube.

The Federal Reserve doesn't operate under the same accounting rules as public corporations. In fact, I guess I don't know what rules they operate under, other than those dictated by the Congressional committees responsible for oversight of the Fed and whatever laws and regulations Congress has imposed on the agency.

This woman is clearly not experienced in testifying before members of Congress, even though the empty chairs and absence of an audience suggests that it was a minor or sub-committee hearing. Notwithstanding her high-sounding title, she probably shouldn't be pilloried for that shortcoming. If you recall, even the CEO's of the auto companies didn't exactly engender confidence with their testimonies and they have a helluva lot more experience dealing with the public and the press than this lady does.

Should she be familiar with the issues suggested by the Congressman and supposedly reported on Bloomberg? Yeah, she probably should have. Even if she doesn't have a Bloomberg monitor at her desk--she would have no reason to--some of her staff should have prepared her for the possibility of such a question.

Having thorough answers to questions regarding the off-balance sheet transactions is another issue. In the end, she works for the Chairman or the Federal Reserve. Her job description says, that she "leads a staff responsible for promoting economy, efficiency, and effectiveness within Board programs and operations. The Office of Inspector General (OIG) is also responsible for preventing and detecting waste, fraud, and abuse at the Board, among other duties. The OIG achieves its legislative mandate through audits, evaluations, investigations, legislative reviews, and by keeping the Chairman of the Board and Congress fully informed."

The OIG probably has a series of regular audits that the department conducts. Beyond that, she would do the bidding of the Fed Chairman and the responsible committees of the Congress. She probably shouldn't take all the heat for not being the "Carnac of the Fed"--all-seeing and all-knowing. In the end, the OIG is a bureaucrat and does what she is told.

I'm not defending the lady at all. She really did look pretty helpless. But what I am saying is that if there really is something "off balance sheet" that should be investigated, the responsibility for ordering such an inquiry is as much the responsibility of the Fed Chairman and Congress as it is hers.

Using a corporate analogy, we didn't and probaby shouldn't have placed total blame for the Enron collapse on the chief auditor of the company. There were audit commitees of the board, senior management, outside auditors and financial analysts that shared the blame for that situation. In the same way, if there really is something wrong at the Fed, the OIG is partially responsible, but shouldn't bear the total blame if something is really amiss.