Posted by Anthony Gregory on 11/11/09 2:59 PM [Newer: Liberty and Racial Harmony] [Older: 90,000 American Casualties]

In the Wall Street Journal. Like many such establishment pieces, the basic line is this: We don't need a broader audit, since the Fed is already subject to all the oversight it needs; at the same time, we can't have an audit, since it will wreck the Fed's "independence." We all know how "independent" the Fed is -- conveniently pumping easy credit whenever a war or election demands it. But taken at face value, the argument is still nonsensical: HR 1207 "will only produce redundancies" and yet will "undermine the Fed's independence." Well, which is it? Is HR 1207 superfluous, or revolutionary? Will it disrupt the apple cart too much, or fail to do anything that's not already being done?

Of course, the Fed shouldn't be "independent." As Murray Rothbard wrote in The Case Against the Fed:

The standard reply of the Fed and its partisans is that any such measures, however marginal, would encroach on the Fed's "independence from politics," which is invoked as a kind of self-evident absolute. The monetary system is highly important, it is claimed, and therefore the Fed must enjoy absolute independence.

"Independent of politics" has a nice, neat ring to it, and has been a staple of proposals for bureaucratic intervention and power ever since the Progressive Era. Sweeping the streets; control of seaports; regulation of industry; providing social security; these and many other functions of government are held to be "too important" to be subject to the vagaries of political whims. But it is one thing to say that private, or market, activities should be free of government control, and "independent of politics" in that sense. But these are government agencies and operations we are talking about, and to say that government should be "independent of politics" conveys very different implications. For government, unlike private industry on the market, is not accountable either to stockholders or consumers. Government can only be accountable to the public and to its representatives in the legislature; and if government becomes "independent of politics" it can only mean that that sphere of government becomes an absolute self-perpetuating oligarchy, accountable to no one and never subject to the public's ability to change its personnel or to "throw the rascals out." If no person or group, whether stockholders or voters, can displace a ruling elite, then such an elite becomes more suitable for a dictatorship than for an allegedly democratic country. And yet it is curious how many self-proclaimed champions of "democracy," whether domestic or global, rush to defend the alleged ideal of the total independence of the Federal Reserve.

Posted 11/11/09 4:22 PM larry101 New York, NY

The amount of misinformation on this topic is out of control. The Fed is audited on an annual basis by a private auditor. http://www.federalreserve.gov/boarddocs/RptCongress/annual08/sec6/c2 .htm and has it's own internal controls audits http://www.federalreserve.gov/oig/ Greenspan was incompetent and Reagon, Clinton, and Bush shoulder the blame. But Fed run by Congress would be exponentially worse than Greenspan

Posted 11/11/09 4:44 PM frozenfiresoul pittsburgh, PA

Whose asking for a fed run by congress?

Posted 11/11/09 4:50 PM Anthony Gregory Berkeley, CA

larry101, who is implying the Fed is not audited? The key is that it's not meaningfully audited. It should not be independent of Congress. It's a government-created agency with power, and should be held in check by Congress, so long as it exists.

Posted 11/11/09 5:47 PM BillNM Carlsbad, NM

Who's asking for a FED...?

Posted 11/11/09 7:07 PM josephrobertsullivan Austin, TX

larry101, watch this short video -- http://www.youtube.com/watch?v=PXlxBeAvsB8 Rep. Alan Grayson asks the Federal Reserve Inspector General about the trillions of dollars lent or spent by the Federal Reserve and where it went, and the trillions of off balance sheet obligations. Inspector General Elizabeth Coleman responds that the IG does not know and is not tracking where this money is.

Posted 11/12/09 12:10 AM mookrit Melbourne, Australia

I wonder if the WSJ would allow Ron Paul or another libertarian economist to reply to this piece on their opinion page? I doubt it, but it's worth a shot.