Ben Bernanke: “My concern about the legislation is that if the GAO is auditing not only the operational aspects of the programs and the details of the programs but making judgments about our policy decisions would effectively be a takeover of policy by the Congress and a repudiation of the Federal Reserve would be highly destructive to the stability of the financial system, the dollar and our national economic situation.”
While many viewers interpreted Bernanke’s statements as a “threat”, we would not rule out the possibility that he was merely stating an opinion that is indeed shared by many economists who grew up under the notion that the autonomy of the Federal Reserve and its mission to centrally manage the economy is sacrosanct and not open to debate.
Fortunately, times have changed and serious questions are being raised as to…
- what the Federal Reserve has been up to in recent years,
- its role in the current economic crisis and the creation of the housing bubble through artificially low interest rates,
- its secret agreements with foreign powers and foreign banking institutions with no oversight whatsoever
- its disastrous effect on the dollar, which lost 96% of its value since the Fed was established in 1913
- whether the Fed should have as much unchecked power as it currently does, and
- the safest way to abolish the Fed if it is established that it has in fact outlived its usefulness.
It’s interesting to consider what happened when President Andrew Jackson tried to abolish one of the Fed’s predecessor banks, the Second Bank of the United States, during his second term (1833 – 1837):
Jackson believed that his reelection was a mandate from the people to break the power of what he called “this hydra of corruption,” the Second Bank of the United States. To accomplish this, Jackson decided to withdraw government money from the bank to pay current expenses and to deposit future government revenues in selected state banks. These banks were called pet banks. Jackson appointed Roger B. Taney of Maryland as secretary of the treasury to carry out this policy after his two previous secretaries refused.
Bank President Biddle and his congressional supporters, led by Clay and Webster, were determined to save the bank. Biddle used the bank’s money to buy political favors. In 1834 the Senate passed a resolution of censure against Jackson and refused to confirm Taney’s appointment to the Cabinet. Biddle said, “This worthy President thinks that because he has scalped Indians and imprisoned Judges he is to have his way with the bank. He is mistaken.”
Biddle began to restrict credit and call in loans from state banks. Business leaders pleaded with Jackson to approve the bank and end the crisis. However, Jackson placed the blame for the panic on the doorsteps of Biddle’s bank and advised all callers to “Go to Nicholas Biddle.” Biddle’s reply was: “All the other banks and all the other merchants may break, but the Bank of the United States shall never break.”
In this struggle for power, Biddle was doomed to defeat. Jackson rallied public opinion behind him, and Biddle was pressured into restoring credit and loans. All he had proved was that Jackson was correct in his contention that a private monopolistic bank, independent of government regulation, should not be entrusted with public finances. Jackson won his greatest political victory, and the Second Bank of the United States passed out of existence when its charter expired in 1836.
Emphasis added – Source