What You Don’t Know Can’t Hurt You: The Case for Federal Reserve Independence
“THE FEDERAL Reserve Board’s independence is a bit like the judiciary’s independence.” Anonymous Editorial, Washington Post, “Focus on the Fed” July 24, 2009. This central premise, it is suggested by one yellow journalist, justifies the Federal Reserve being exempt from audits - more particularly that Congress should decline to pass H.R. 1207. Consider the analogy.
The Constitution sets forth three separate branches of government. In Article III, the Constitution states: “The judicial Power of the United States, shall be vested in one supreme Court.” The independence of the Courts from the Legislative Branch is undisputed. In contrast, the terms “Federal Reserve” and “central bank” appear nowhere in the constitution. In fact, the so-called Constitutional justification for the Federal Reserve appears in Article I - “The Legislative Branch,” Section 8 “Powers of Congress” where the following power is enumerated: “To coin Money, [and] regulate the Value thereof . . . .” The Federal Reserve has no independence from Congress unless Congress voluntarily chooses ignorance as to the activities of the Federal Reserve (which is has done for the last 90 years, albeit in total violation of the principle that legislative power cannot be delegated). The Federal Reserve is about as independent from Congress as Federal District Courts are from the Supreme Court: not independent whatsoever.
The flawed central premise of “independence” is further rebutted by the article itself. “Mr. Bernanke has done more than any other chairman in recent memory to explain his actions and his institution to Congress and the public.” Given that the Federal Reserve has nearly tripled the money supply in the last six months and is complicit in bailing out Wall Street insiders, Ben has had much to “explain.” That said, has anyone ever heard of a Supreme Court Justice being called to testify before Congress on their recent decisions? Of course not.
The Federal Reserve has taken to changing the discussion of a simple audit into a full-blown “second guessing” of monetary policy. No form of logic could bridge the gap between what constitutes an “audit” and what constitutes a “takeover of monetary policy.” When the IRS audits someone’s tax returns, is that person worried that the IRS is going to “second guess” their financial decisions - or are they worried that the IRS is going to uncover gross violations of the tax code?
If audits are good enough for taxpayers, they’re good enough for the Federal Reserve.
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