By Dr. John Fisher
John Birch Society
ARTICLE SYNOPSIS:Treasury Secretary Henry Paulson announced Monday new proposed powers for the Federal Reserve which would give the banking special interest control of much of the financial regulatory system in the United States and lead the country further into socialism.
The U.S. Treasury proposal would "give broad power to our Federal Reserve system." The greatly expanded role would give it responsibility for market stability.
According to The Economist, the Fed would get "authority to inspect institutions of all stripes in order to build a picture of overall systemic risks, and the power to insist on corrective action. It would also win wide-ranging powers to look at the books of investment banks that borrow through its discount window — an arrangement it was forced to introduce last month as Bear Stearns tottered."
Until now, the Federal Reserve has had control of only a portion of the banking system. In addition, under the proposal the authority of the Securities and Exchange Commission (SEC) would be greatly weakened. Treasury’s proposal would merge the SEC with the Commodity Futures Trading Commission, which controls futures contracts. The Economist said "the combined body would adopt the latter’s principles-based approach (the lawyer-heavy SEC, by contrast, likes to write and enforce rules)." The new agency would add other agencies to become "the business-conduct super-regulator."
As if that is not enough, the new proposal would let the Fed control the investment sector of the economy. Before that happens, Americans should remember that, as an independent entity, the Federal Reserve is not owned by anyone and its decisions do not have to be approved by the president or anyone else in the executive or legislative branch of government.
In fact, the Federal Reserve is a part of the banking system and protects and represents the interests of bankers in America. In the past weeks while many home owners faced foreclosures and consumers felt the strain of rising prices, banks ran to the Fed to shore up their reserves against recession. Little of this was passed on to consumers.
According to its website, Congress established the Federal Reserve System in 1913 as the central bank of the United States. Over the years, its role in banking and the economy has expanded to include control over the nation’s monetary policy, supervising and regulating banking institutions, maintaining the stability of the financial system, and providing financial services to depository institutions, the U.S. government, and foreign official institutions. This last function includes playing a major role in operating the nation’s payments system. In other words, the Fed controls our nation’s money supply.
The Federal Reserve system is made up of 12 regional banks, each directed by a nine-member board. Six of the nine members are elected directly by private commercial banks. It is not surprising then that the Fed represents the interests of banks.
Long ago Congress gave up its Constitutional obligation to control the nation’s monetary policy. No longer is our economy controlled by market demands. Instead both our monetary policy and economy are controlled by banking interests. With the Federal Reserve getting more power, we see our monetary system, our economy, and our government more in the control of the banking special interest.
A year before he signed the Federal Reserve into existence, Woodrow Wilson said: “Liberty has never come from Government. Liberty has always come from the subjects of it. . . . The history of liberty is a history of limitations of governmental power, not the increase of it.”
Today we see how Wilson’s actions, not his words, are limiting rather than increasing our liberties.
I’m not an economist, nor do I know a lot about monetary policy. However, I do believe in a free market system. Rather than supporting a free market economy, the Federal Reserve, like central banks around the world, represent government control. In the past few weeks, because of fear of recession, we have let government bring us further under the strictures of socialism. These new controls to the Federal Reserve are just one step further along this road.