Does the creation of the Federal Reserve system violate the US Constitution?

Question

Article 1, Section 8 states that Congress shall have the power to coin (create) money and regulate the value thereof. In 1935, the US Supreme Court ruled the Congress cannot constitutionally delegate its power to another group or body.

Answer 1

No. Congress has the right to make any law that is 'necessary and proper' for the execution of its enumerated powers (Art. I, Sec. 8, Cl. 18).  A law creating a Bureau of the Mint, for example, is necessary and proper for the Congress to exercise its right to coin money.  A similar argument may justify a central bank.  It facilitates the expansion and contraction of the money supply and it serves as means to regulate the banking industry.

Is this a reasonable use of the necessary and proper clause?  I do not know, but a test of its meaning came early.  The history of central banking in the United States does not begin with the Federal Reserve.  The Bank of the United States received its charter in 1791 from the U.S. Congress and Washington signed it.  Secretary of State Alexander Hamilton designed the Bank's charter by modeling it after the Bank of England, the British central bank.  Secretary of State Thomas Jefferson believed the Bank was unconstitutional because it was an unauthorized extension of federal power.  Congress, Jefferson argued, possessed only delegated powers that were specifically enumerated in the constitution.  The only possible source of authority to charter the Bank, Jefferson believed, was in the necessary and proper clause.  However, he cautioned that if the clause could be interpreted so broadly in this case, then there was no real limit to what Congress could do.

Hamilton conceded that the constitution was silent on banking.  He asserted, however, that Congress clearly had the power to tax, to borrow money, and to regulate interstate and foreign commerce. Would it be reasonable for Congress to charter a corporation to assist in carrying out these powers? He argued that the necessary and proper clause gave Congress implied powers -- the power to enact any law that is necessary to execute its specific powers. A “necessary” law in this context Hamilton did not take to mean one that was absolutely indispensable. Instead, he argued that it meant a law that was “needful, requisite, incidental, useful, or conducive to” the primary Congressional power which it supported. Then Hamilton offered a proposed rule of discretion: “Does the proposed measure abridge a pre-existing right of any State or of any individual?” (Dunne, 19).  If not, then it probably is constitutionally proper on these grounds.  Hamilton’s arguments carried the day and convinced Washington.

The Supreme Court had its say on the matter in McCulloch v. Maryland (1819).  It voted 9-0 to uphold the Second Bank of the United States as constitutional.  The Court argued with the doctrine of implied powers, stating that to be ‘necessary and proper’ the Bank needed only to be useful in helping the government meet its responsibilities in maintaining the public credit and regulating the money supply. Chief Justice Marshall wrote, “After the most deliberate consideration, it is the unanimous and decided opinion of this court that the act to incorporate the Bank of the United States is a law made in pursuance of the Constitution, and is part of the supreme law of the land” (Hixson, 117). The Court affirmed this opinion in the 1824 case Osborn v. Bank of the United States (Ibid, 14).

Therefore, the historical legal precedent exists for Congress' power to create a central bank.  It formed the Federal Reserve system in 1913 to perform many of the same functions as its predecessors.  As before, the courts have agreed that a central bank, and the Federal Reserve in particular, is constitutional.

Answer 2

well yes, i believe that the Federal Reserve Act of 1913, signed by the one of the great progressive movement thinkers, woodrow wilson does indeed violate the constitution.

furthermore, we have some evidence that he knew it did at the time.  You see woodrow wilson, like most progressives, see the constitution as an outdated idea, that needs some major rehauling.

Answer 3

Also, I believe that it does violate the Constitution and cannot see why SCOTUS has never ruled on this question directly----Wendell House(hope this is spelled correct) had the ear of Woodrow Wilson when he signed the bill creating the FED and he represented the interests of the banking interests.