The Federal Reserve

The Federal Reserve wields enormous power over the national economy. Its decisions have a major impact on every citizen. Jobs, shelter and the quality of life are greatly affected by what the Federal Reserve decides on monetary policy.

Yet, the Federal Reserve is allowed to make its decisions in secret.
The transcripts and minutes of the meetings are carefully “sanitized” before they are released. When the Federal Reserve voted to lend money to Mexico, for example, the Federal Reserve’s records were carefully redacted to keep the details of the transactions secret.

In a recent article in Barron’s Magazine, Dr. Robert Auerbach, who investigated the Federal Reserve as staff economist for the Banking Committee of the House of Representatives, recounts numerous incidents in which minutes were destroyed or heavily edited when the Federal Reserve made critical decisions.

Auerbach along with other economists and long-time observers of the Federal Reserve will be gathering at the National Press Club in Washington next week (January 7) to discuss what goes on behind those tightly-locked doors at the Federal Reserve.

In sponsoring this conference, it is my hope that we can place a spotlight on this dark corner of our democracy and begin a campaign for a more open process in establishing economic policies that affect the daily lives of working families and well-being of the entire economy.

The kind of secrecy and closed-door government carried out by the Federal Reserve has no place in a democratic system. In addition to exemptions from open government requirements such as the “Sunshine Act,” the Federal Reserve does not face the normal checks and balances of the Congressional appropriations and budget process. It drafts its own budgets and spends whatever it desires without seeking permission from the Congress. It is little wonder, that the Federal Reserve feels free to operate as virtually a separate government.

One of the experts who will appear at our January 7 conference is William Greider, a long-time journalist, who wrote the book, Secrets of the Temple, a carefully researched tome which has become a must-read for students of the Federal Reserve.

Keynote speaker for the conference will be James Galbraith, Ph.D atthe LBJ School of Government, University of Texas, who has written and lectured extensively on the Federal Reserve and who is rapidly becoming the nation’s most outspoken and best informed critic of the the Federal Reserve and current monetary policy.

In addition to setting interest rates in carrying out monetary policy, the Federal Reserve has wide-ranging regulatory power for consumer protection over the financial community. It is strange, indeed, that this power would be exercised by the current chairman of the Federal Reserve, Alan Greenspan, whose past would give little comfort to anyone who believes in regulatory protections. Greenspan was an early follower of Ayn Rand, the leader of the Objectivists, an anti-government collective. Greenspan collaborated with Ayn Rand in writing Capitalism: the Unknown Ideal in which he denounced regulation, particularly consumer protections and anti-trust laws which he described as “cardinal ingredients of welfare statism.”

Later, Greenspan became a lobbyist for the financial industry against regulation and represented some of the high flyers-like Charlie Keating of Lincoln Savings–who plundered the savings and some industry.

So, we plan for our conference to take a deep look at how well this ex-foe of regulation is representing the public in his current position as chief government regulator of banks, big financial services corporations and the economy.

The conference is titled “The Federal Reserve-Reality versus Myth.” We hope that our panel of experts will be able to unravel some of the myths that have allowed the Federal Reserve to escape accountability for so long to the detriment of the vast number of working Americans and our democratic system of government.