The Federal Reserve Disaster

The Federal Reserve Disaster
For the first 137 years of our country’s history, our government thrived on the principles of federalism. Up until the early 20th century, our monetary policy was shaped and enforced by the Congress. In 1913, Congress established the US Federal Reserve to give the economy a much more stable and secure structure. By putting the Federal Reserve in charge of US monetary policy, the United States severely compromised its own principle of federalism. The entire idea of federalism is that the government is representative of its citizens; however, the Federal Reserve is unaccountable to the people because its officials are not elected. While some may claim that the Fed’s unelected and independent status can somehow be a good thing, I argue that because of its lack of representation, the Federal Reserve should be abolished.
The Federal Reserve is an unelected body of government and is therefore in conflict with the practice of Federalism. Federalism by definition is a political philosophy that binds a group of people together with a representative government at its head. Our monetary policy should be run by representative leaders that were elected by the people. Monetary policy and the regulation of a nation’s currency is an important issue to a great many Americans and they don’t want to see it run by an organization that has no incentive to represent public opinion. For example, in March 2008, over a weekend of private negotiations, the Federal Reserve advanced 55 billion dollars of the taxpayer’s money to JPMorgan Chase so that it could buy out Bear Stearns at two dollars a share. The takeover was hostile because it wasn’t approved by the shareholders or the American people. A government entity should not have the power to spend so much of the taxpayer’s money and not be accountable to those same taxpayers.
The solution to this insufficient representation of government is to abolish the Federal Reserve and restore the power to the United States Congress. By doing so, the citizens of the United States will be directly represented in monetary policy. In Article I Section 9 of the Constitution it states: “The Congress shall have the power… to coin money, regulate the value thereof, and of foreign coin, and fix the standard of weights and measures.” Even the framers of the Constitution understood this principle of federalism when they wrote the constitution. They understood that it was the elected representatives of the Congress that should shape and enforce monetary policy in the United States. It is time that our Congress reassumed its Constitutional duty.
Some may claim that we are represented adequately by the Federal Reserve. They will argue that because the President nominates the chairman and the Congress ratifies it, that the Federal Reserve represents the American people. Their point is that because the American people elect the president and congress, these branches of government will in turn appoint a chairman that also represents the American people. Another might also argue that because there is a degree of congressional oversight of the Federal Reserve, such as annual testimonies and audits by the Government Accountability Office, that the Congress is fulfilling its Constitutional duty of regulating monetary policy.
A nomination by the Executive Branch and ratification by Congress is not adequate representation of U.S. citizens. It states in Federalist no. 59 that: “appointments for the supreme executive, legislative, and judiciary magistracies should be drawn from the same fountain of authority.” By the same fountain of authority, he means the votes of the citizens. Madison also stresses in Federalist no. 59 that “members of each should have as little agency as possible in the appointment of the members of the others.” It is dangerous to let a branch of government appoint the leaders of another branch- this erodes the separate interests of each branch of government. It is also known that 12 private banks comprise the Federal Reserve. Only a few of these banks have been identified and some are even foreign. Half of the stockholders of the Fed are also foreign. Because the Fed answers partly to foreigners, it does not always have the best interests of the USA at heart. The Fed is not fully accountable to the people if it is allowed to operate under this level of secrecy and in order for the Federal Reserve to be adequately representative it needs to be open about its structure.
Our republic relies drastically on the principal of federalism. We rely on a representative government to carry out the will of the people. Monetary policy is extremely important to the American people and the fact that a private institution with inadequate representation controls that policy in the US is absolutely unacceptable. Our monetary policy needs to be shaped by a body of government that is directly representative to the American people and is subject to the checks and balances that arise from the separation of powers- the Congress. Because the Federal Reserve isn’t subject to these standards it should be abolished.