Congress should vote to audit the Federal Reserve

Every financial disaster in the past century can be attributed to the Federal Reserve (the Fed) mishandling power. Wrong predictions, mass printing of money, creating artificial credit and manipulating interest rates are all failed Fed schemes to control the economy.

Sen. Rand Paul recently re-introduced the Federal Transparency Act (Audit the Fed) bill to Congress. The purpose of this bill is to require a detailed audit of the Fed as well as hold it accountable for deviations from monetary policy. The bill also forces transparency upon the institution that has a monopoly on our money. Transparency to the citizens of the United States forces the Fed to act more cautiously with citizens’ money.

The Trump administration is a wild card the U.S. has never seen before. To this point, the media-focused legislation proposals have all been extreme. Fortunately, behind the lunacy of other proposed pieces of legislation, this is a one actually worth passing.

Unfortunately, many Americans are uninformed of what the Fed actually does. Many believe the Fed is the government’s bank, saving the country from inflation and unemployment. In a perfect world, this would be true.

In today’s society, the Fed’s responsibility is to make sure the economy stays level. The Fed makes sure the economy does not undergo booms or busts, and that inflation stays at a healthy rate, unemployment stays at the target, the money supply is not too big or too small, interest rates are in check and there is a pot of gold at the end of each American’s rainbow.

However, every action has an equal and opposite reaction. One example: when a negative externality occurs and the Fed intervenes to prevent a bust. This typically helps the economy in the short run but has devastating long run consequences.

When the housing market is booming because credit is cheap, brokers lend millions of subprime mortgages, then people buy homes they cannot actually afford. When interest rises in the long run, people can no longer afford to live in their homes and are forced to move. This example describes what occurred during the “Subprime Mortgage Crisis” of the 2007 recession.

This wrong-handling of power can be avoided if the Fed were held accountable to the American people. Although the Fed is supposed to be a separate, non-government entity, the chairperson is appointed by the U.S. president. It would make sense that a government appointed position would bear some political pressures. The Fed needs checks and balances.

The only feasible solution is to oversee the Fed’s policy changes and strategies to make sure it is acting in the best interests of the people, not the best interests of the government. The “Audit the Fed” bill would do exactly that.

The Fed controls trillions of dollars that belong to the American citizens, and this control also goes unchecked. Allowing a monopoly on our money without having a place at the table seems an awful lot like taxation without representation.

According to Paul, the Fed also has the power to lobby Congress against auditing. Although this is not surprising, it is quite powerful. What does the Fed have to hide? If everything is legitimate and all the right decisions are being made, what do the Fed and its members have to lose?

Chairwoman Janet Yellen, who opposes auditing the Fed, said it would “politicize monetary policy.” There’s already politics involved, since she was appointed by former president Barack Obama.

Moreover, the bill is not instructing the Fed on how to conduct monetary policy. It just gives Congress the power to oversee and chastise the Fed’s actions. This bill does not give Congress the power to enact monetary policy; it only gives them power to check the monopoly the Fed already holds.

It is imperative to fix this problem for the sake of each college student who owes money, each millennial trying to make his or her way in the post-graduation world.

Generations before have ignored the Fed’s problems or were incapable of fixing them. Paul has brought us the tools to check the most powerful entity in this country: the Fed. If Trump and Congress truly desire to “Make American Great Again,” they will stop preying on immigrants, he will stop worrying about female anatomy and he will start focusing on the root of all evil: money.

Opinion columnist John Brucato is an economics senior and can be reached at [email protected]