What can more government control on the federal reserve system do?

Question

I'm doing a speech and need information to support government control on the federal reserve

Answer 1

The first thing that needs to be done is to make all of their meetings and decisions completely open and a part of public record so that citizens (and Congress) can become educated about what exactly it is that they do, and how they reach their decisions.

To negate the possibility of conflicting interest or collusion, every member of the federal reserve should also be required to publish their stock holdings, board memberships, sources of income and any other relevant financial data.

Finally, the federal reserve should be required to back all loans and currency with gold or silver, as specified by the Constitution.  This would have the immediate effect of drying up the bottomless well of "funny money" which has made possible our monumental national debt.

Answer 2

Let's look at how much control there is today, and how much there was in the past.

Though considered "independent", it is not absolute and both congress and the president exercise influence whenever they feel the need.

The Board of Governors are all appointed for 14-year terms by the president and confirmed by congress. It operates per it's charter and laws set by congress and is overseen by congress. Audit reports are required at least once a year as well as meeting directly with congress.

Though considered an independent government agency, the Fed is still susceptable to political pressure. When Congress has a concern, they call the Fed chairman to the hill to 'discuss'. If Congress isn't satisfied, they may pass a law or two to make the Fed pay attention, or simply ensure the next appointee 'understands' Congressional wishes.

The most obvious and transparent example was Greenspan's endorsement of Bush tax cuts. The Republican Congress put a lot of pressure to get that. In Greenspan's book, that's one of his biggest regrets is endorsing the cuts that brought record deficits to the economy.

Some historical references...

The power structure was a lot different when the Fed was founded. Back then the Board of Directors (now the Board of Governors) was headed by the Treasury Secretary and a second seat was reserved for the Treasury's "Office of Comptroller of the currency". But the branches had considerable autonomy and the Board was not that effective.

When the Great Depression hit, this inability to coordinate a national monetary policy was a major obstacle toward addressing some of the problems. This changed with the Bank Act of 1935 which:

1) Removed autonomy of the branches and placed them under direct control of the newly renamed Board of Governors

2) Eliminated the Treasury Secretary's position on the board.

A further step toward independent came in 1951 with the Treasury Accord that further reduced the Treasury's influence over the Federal Reserve.

Transition the nation's central bank toward more independence was very common in the 20th century by many countries. As countries got off the gold standard, countries could now print money to pay for expenses. Look up hyperinflation and you see that virtually every modern case was a ruler/ruling-party ordering their central bank to print money. (Look up zimbabwe for instance).

Today there are several laws that govern oversight of the Fed uunder  U.S. Code Title 12:

http://www.law.cornell.edu/uscode/html/u...

http://www.law.cornell.edu/uscode/html/u...

http://www.law.cornell.edu/uscode/html/u...

Some excerpts:

- "The Board of Governors of the Federal Reserve System shall annually make a full report of its operations to (congress)..."

- "..(Board of Governors) report to the Congress a full account of the (FMOC) action so taken during the preceding year with respect to open-market policies and operations ..."

- " The Board shall order an annual independent audit of the financial statements of each Federal reserve bank and the Board."

Educational Reference Links:

The Federal Reserve - Board of Governors site - http://www.federalreserve.gov/

A Federal Reserve site for educators - http://www.federalreserveeducation.org

Federal Reserve publications - http://www.federalreserve.gov/publicatio...

Wikipedia - http://en.wikipedia.org/wiki/Federal_Res...

Map of the branch locations - http://www.federalreserveonline.org/

FAQs - http://www.federalreserve.gov/faq.htm

Index to Federal Reserve sources - http://www.federalreserve.gov/general.ht...

FAQs (Richmond) - http://www.richmondfed.org/faqs/index.cf...

How the Fed works - http://money.howstuffworks.com/fed.htm

What is the Federal Reserve - http://www.thisnation.com/question/033.h...

FRS reports to congress - http://www.federalreserve.gov/boarddocs/...

Good luck on your speech!