>It is no secret that Thomas Jefferson was against a central bank, in fact the following quote seems rather prophetic:
The central bank is an institution of the most deadly hostility existing against the Principles and form of our Constitution. I am an Enemy to all banks discounting bills or notes for anything but Coin. If the American People allow private banks to control the issuance of their currency, first by inflation and then by deflation, the banks and corporations that will grow up around them will deprive the People of all their Property until their Children will wake up homeless on the continent their Fathers conquered.
The debate today however is not a Jefferson versus Hamilton (should we or shouldn’t we have a central bank), but whether or not the Federal Reserve should be Independent of the federal government. There is much debate about the independence of the Federal Reserve, many don’t believe it is Independent, or do and want it more accountable. The fact of the matter is that the Federal Reserve is a branch of government, though it is controlled by bankers and is perhaps the most powerful branch of our behemoth government.
In David Wessel’s book, “In Fed We Trust” there are a few things that I learned that shocked me, but now make sense given what has transpired over the past few years:
“From the beginning, the regional Fed banks were organized not as government agencies, but as private companies in which local banks own shares, a remnant of a time when central banks raised capital privately as well as publicly. Under the 1913 law (to create the Fed), each bank has nine directors, the majority chosen by the banks in the district. Three are bankers. Three are nonbankers picked by the local banks. Three are chosen by the Fed board in Washington to represent the public.”
Interestingly enough the “nonbanker” chosen for the New York Federal Reserve was none other than Stephen Friedman, a former Goldman Sachs CEO and then member of the Goldman board of directors (now disgraced and no longer a member of the NY Fed after it was discovered he was buying stock in Goldman Sachs while he was making decisions about its future).
It was these people who hire the head of the New York Federal Reserve branch (the most powerful branch), it was these people (the so-called bankers and non-bankers….who were really just insiders and bankers) that hired Timothy Geithner. Its a pretty nice deal when you can essentially hire your own regulator.
Its beginning to make sense why the Federal Reserve was so asleep at the switch, they were never supposed to be awake, it was set up that way (maybe not originally, but that is how it turned out).
In Wessel’s book he makes clear that Bernanke and even Geithner did not understand the complex securities being traded and sold by wall street and the banks – which is a complete dereliction of duty, which should be punishable by job loss. Instead Geithner and Bernanke kept their jobs and Geithner was promoted (this must be one of the jobs “saved”).
My point is that the Federal Reserve is NOT independent, it is highly controlled and it is designed to work in favor of Wall Street and the bankers, not main street and the citizens. Whether or not the Federal Reserve is independent of congress and the President is a moot point, they are not independent of those who control congress and the President.
Fed Independence is a myth and the current debate is a waste of time, the real question is not how much power the congress should have over the Fed, the real question is how much control Wall Street should have over the citizens of the United States.
Scott Dauenhauer CFP, MSFP, AIF