House Democrats: We have no spine! Vote for us!

The Federal Reserve scored a political victory as Democrats mulling financial reform backed off measures that would expose monetary policy to audits and make the head of the New York Fed a political appointee.

The U.S. House of Representatives had approved a bill in December that included a provision, championed by Texas Representative Ron Paul, that would have opened the Fed's interest rate policy to congressional audits.

But on Tuesday, House Democrats participating in negotiations over a final financial reform bill, decided on a narrower Senate audit provision that does not cover monetary policy.

"Many politicians wanted to extract a pound of flesh from the Fed," said Eric Lascelles, chief economics and rates strategist at TD Securities. "That seems to be cooling off now."

The Fed, which has admitted it was too complacent about regulatory oversight in the run-up to the global financial crisis, has come under heavy fire for being too close to the banks it regulates.

The House Democrats also said they would try to defeat a plan contained in the Senate bill under debate that would allow the U.S. President to name the head of the New York Fed, a step that Fed officials have argued would undercut the central bank's political independence.

"It is disappointing to see both the removal of the provision about the president picking the New York Fed president and also the prohibition of bank employees serving as Fed presidents," said Dean Baker, co-director of the Center for Economic and Policy Research. "This would have been a big change toward taking away the banks' control over the Fed."

But, but ex-oil employees are always taking jobs as regulators and cabinet level positions, and look how well that's working out for everyone, right?

In other news, the sky is blue.