During this financial crisis, rarely a day passes without the media reporting on some action the Federal Reserve takes. As a central bank, the Fed is responsible for the monetary policy of the United States.
Monetary policy is conducted by manipulating the money supply, which has important implications for the broader economy.
This responsibility has created active campaigns that attack and seek to discredit the institution.
The interesting, yet failed, presidential bid of Texas Republican Rep. Ron Paul has led to the creation of www.AuditTheFed.com, a Web site devoted to such attacks. Most spread misinformation, and it’s important to understand the financial institutions that impact your day-to-day life.
Popularized on the Internet, propagandist documentaries like “Zeitgeist” argue the Fed exists as an unconstitutional entity. This argument suggests that because the Federal Reserve is a private entity, it has no constitutional right to control the money supply — i.e. currency.
The Fed exists as a system with 12 regional banks and a central Board of Governors. Although the presidents of the individual Fed banks are privately employed, the president appoints members of the Board of Governor and the Senate then moves to confirm them.
The Federal Reserve System is a mix of public and private components and the Federal Open Market Committee, which sets monetary policy, includes the seven Board members and five regional bank presidents on a rotating basis.
Though the Fed isn’t an entirely private organization, questions regarding its constitutionality persist. However, the landmark 1819 Supreme Court decision in McCulloch v. Maryland, established the constitutionality of the Second Bank of the United States, which was a private banking institution chartered by the federal government. The Fed’s mixture of public and private components was innovative and is precisely why the Fed has lasted longer than the other two national banks in our country’s history.
Paul authored HR 1207, a bill calling for a full audit of the Fed, which has collected 282 cosponsors and generated a similar bill in the Senate. The Government Accountability Office and an independent accounting firm already audit the Fed’s operations in accordance with Section 11B of the Federal Reserve Act of 1913.
Paul’s bill addresses the fact that no authority audits monetary policy decisions. Though the Federal Open Market Committee is not audited, it is transparent because the Freedom of Information act requires all meeting minutes are made available online.
Nevertheless, the question persists as to why this important aspect of the Federal Reserve is not audited.
Ben Bernanke’s June 25 congressional testimony addressed Paul’s bill should it become law. Bernanke said the bill “would effectively be a takeover of monetary policy by the Congress [and] a repudiation of the independence of the Federal Reserve, which would be highly destructive to the stability of the financial system, the dollar and our national economic system.”
The independence of a central bank is essential, and there is a large body of economic literature to support that assertion. In fact, many of the great failures of central banks that have led to hyperinflation, such as Weimar Germany or Zimbabwe, happened when politics took control of monetary policy.
I believe Paul has honest intentions, but the real effect of his proposal would be more government control.
Brandon McVey is a finance, German and accounting senior.
31 comments
We handed out a couple trillion dollars and want to know where its going does that make us "wingnuts" real "changes" are coming folks, one way or another, and the power is inherently in the people..
This responsibility has created active campaigns that attack and seek to discredit the institution."How dumb are you sir, the land of the "free and the brave" is becoming the land of the "meek and the slave" thanks to ignorant folks like you who do not know how the world of finance and Government work.A redeemable precious metal standard will make you free again, study financial history and give yourself the opportunity to be free again.
would like to manipulate! When that is done I hope we are able to abolish "The Fed" very quickly!
The new system being formed is not one based upon any notion of competition or “free markets” or “socialist morality”, but is, instead a system based upon consolidation of power and wealth; thus, the fewer the better; one government, one central bank, one army, one currency,one authority, one ruler. This is a much more “efficient” and “controllable” system, and thus requires a much smaller population or class to run it, as well as a much smaller population to serve it. Also, with such a system,a smaller global population would be ideal for the rulers, for it limits their risk, in terms of revolt, uprising, and revolution, and created a more manageable population. In this new capitalist system, the end goal is not profit, but power. It was through the central banking system that the most powerful figures and individuals ( Elitists ) in the world were able to consolidate power, controlling both industry and governments.These figures would collapse economies, destroying industry and thus, profits; bankrupt countries and collapse their political structures, destroying a base for the exercise of power; but in doing so, they would consolidate their authority over these governments and industry,wiping out competition and eliminating dissent.These are the main figures in the current reorganization of world order. Those who are driven by the lust for power often eliminate and remove all of those who helped them reach such a position.Power alters the psychology of the individual that holds it.Once power is achieved, and with no more power to gain, the obsession turns to the preservation of power & the paranoia of losing it.Power is a cancer; it eats away at its host.The greater the power held, the more cancerous it is, the more malignant it becomes.Power must be shared among all people the risk carried thus becomes a risk to all,and there is a more effective means through which everyone can act as a check against the abuse of power.
Finance and accounting are two systems that got us into this mess.
It's the economists who now have to figure it out.
if you don;t know what you`re talking about, keep your mouth shut