MOBILE, Ala. — The Federal Reserve could become a threat both to liberty and to the economy it is supposed to safeguard.
The nation’s central banking system is wading into woke, racial politics and an environmental agenda having nothing to do with its legal mandate, while the political Left aims to give the Fed far more power. The Fed’s mission creep, or, more accurately, a mission gallop, is profoundly dangerous.
For one of the increasingly numerous examples of the Fed pushing beyond its legal mandate, consider an Oct. 20 forum planned by the Federal Reserve Bank of Minneapolis called “Racism and the Economy: Focus on the Wealth Divide.” It’s the ninth in a series of race-obsessed forums on issues ranging from healthcare to housing to criminal justice. (Since when was criminal justice an issue for central bankers?) This particular event “focuses on how racialized barriers to wealth accumulation deny families and communities long-term economic mobility and financial resiliency,” and “a panel of practitioners, scholars, and community leaders will propose and discuss bold strategies to finally reverse these trends.”
To be clear, discussions like these can be quite worthwhile and productive. (I am a panelist for just such an event down here in Alabama the day before the Minneapolis Federal Reserve event.) All of us should want to ensure that the economy encourages upward economic mobility and that race not be a deterrent.
Still, such discussions are the province of academic, civic organizations, or elected political leaders. They are far from the purview of central bankers acting with vast governmental authority but almost no public accountability. These forays into non-banking policy and political issues are majorly misguided for two reasons. They put the economy at risk by distracting from the Fed’s core missions, and they could allow the Fed to accumulate unwonted power without (small-‘r’) republican guardrails.
The Federal Reserve system is complicated, and in some ways ingenious, as it gathers vast amounts of both qualitative and quantitative data, much of it hard data but plenty of it anecdotal (of sorts) from leading businessmen who serve on its regional advisory boards. On the other hand, with restraints on its operations being rather amorphous, and with the immense effects its banking decisions can have on the health of the entire U.S. and world economy, the Fed’s independence from democratic accountability can be almost as much a danger as a good to the public weal.
That’s why the Fed should stay in its own lane. By law, the Fed has two, and only two, jobs. Its task is to “promote effectively the goals of maximum employment, stable prices, and moderate long term interest rates.” The third part, the moderate interest rates, is as much means as it is an end, which is why in common parlance the mission is called a “dual mandate” (not a tri-mandate) of economic growth and well-controlled inflation. Although those two are certainly not mutually exclusive, they often act in natural tension with each other, so the Federal Reserve Board has plenty on its plate without trying to solve racism, climate change, and any other cultural problem this side of halitosis. The more it veers from its mission, the more it risks screwing up that mission.
It also risks putting central financial authority on the scales with regard to those other issues on which it has no competence, thus screwing up policy in those realms as well.
Meanwhile, as President Joe Biden’s nominee for Comptroller of the Currency literally wants to eliminate private banking and give Federal Reserve banks oversight of private accounts, the dangers of mission gallop become apparent. If too much financial control rests in the same hands as responsibility for solving alleged (but oft-disputable) social ills, the leviathan state has even more means to crush individual rights and autonomy.
When the Fed veers into these non-mandated areas, it exceeds the powers afforded to it by a representative government. Even some liberals who want to provide such authority to the Fed understand that by law and right the Fed doesn’t properly enjoy that scope today. That’s why some leftist members of Congress have introduced the Federal Reserve Racial and Economic Equity Act and why some Federal Reserve governors want Congress to “add language” to the existing Federal Reserve Act, both efforts intended to make the Fed responsible for countering racism.
Simple logic says that if the Fed properly enjoyed that responsibility today already, nobody would need to introduce legislation to provide it.
A bank is a bank is a bank. It should not be a social-justice organization. Especially if it enjoys all the force of, but none of the ordinary restraints on, an already huge elected government.
