The Bush Administration’s Treasury Secretary Henry Paulson has proposed an excessive broadening of powers for the Federal Reserve; the move is thought to be in reaction to the recent panic in the financial markets and overall economic instability in the United States.

The new powers granted to the Federal Reserve would include strengthened powers of oversight not only on Wall Street but in the broader scope of United States financial markets.

The New York Times is reporting that, “Many of the proposals, like those that would consolidate regulatory agencies, have nothing to do with the turmoil in financial markets.”

Looking back at the historical precedence for such a proposal, the similarities are striking between the events that led to the Federal Reserve in 1913 and the current proposal of the significant broadening of powers of the private central banking institution.

In both cases J.P. Morgan emerged on the other side of the dark economic times in better shape than when a major financial institution collapsed. In the case of the 1907 panic it was the man Jack Pierpont Morgan that benefited from the strain in the market and in the 2008 panic the financial banking institution J.P. Morgan has taken advantage of the hard luck of financial giant Bear Stearns.

The panic of 1907 eventually lead to the formation of the National Monetary Commission which was then the commission in 1913 that recommended the formation of the Federal Reserve Bank through the Federal Reserve Act.

The similarities in this current economic crisis that the United States economy faces and the panic of 1907 is that J.P. Morgan is once again the element that is bailing out failing financial institutions, this time around the name was Bear Stearns and the answer to the financial crisis, since the central banking system is already in place, is the strengthening of the central bank.

In 1907 the faltering bank that sent the country into a panic was the Kinkerbocker Trust Company, the difference between the 1907 situation and the Bear Stearns collapse being that the Kinkerbocker Trust was allowed to go completely under and J.P. Morgan stepped in to save the banks that the Kinkerbocker Trust was threatening to bring down with it while the Fed took steps to prevent the complete collapse of Bear Stearns.

Another interesting aspect of Paulson’s proposal includes a recommendation to broaden the President’s financial group’s authority to be “broadened to include the entire financial sector, rather than solely financial markets.”

There is a possibility that this broadening of powers is not Paulson’s idea, but rather the Federal Reserve’s power grab in a situation that lends itself to capitalization on the fears of the public, and the longing for “stability.”

It will be important to watch how Congress will react to Paulson’s proposal on Monday, the general consensus is that the Democrats will complain that Paulson’s proposal does not go far enough to prevent another economic meltdown and therefore is unlikely to be implemented.