New York Times on Ron Paul

There's an interesting article by Floyd Norris in today's New York Times about Ron Paul and his upcoming chairmanship of the House Monetary Policy Subcommittee, which I previously wrote about here. It's an interesting and important read, and I suggest you give it a look if you have the time.

The article does a fantastic job not only of laying out the history of the Fed and its relationship with the Federal Government at large, but also of setting up the imminent debate between Ron Paul and Ben Bernanke. I personally think that this debate/showdown will be one of the most important stories to watch in 2011, as the Fed's seemingly unchecked power comes under ever further scrutiny.

A congressman from Texas, long a dissident critic of the Federal Reserve, is scheduled to become the chairman of a House panel with jurisdiction over the central bank. It promises to be a miserable time for the Fed chairman as he is peppered with hostile questions at oversight hearings and with legislation to force complete audits of Fed operations.

So it is now, with Representative Ron Paul about to take over as chairman of the Domestic Monetary Policy Subcommittee of the House Financial Services Committee. Mr. Paul campaigned against big banks, arguing that concentrated financial power goes hand in hand with concentrated political power.

If the Fed were abolished, he wrote last year, “the national wealth would no longer be hostage to the whims of a handful of appointed bureaucrats whose interests are equally divided between serving the banking cartel and serving the most powerful politicians in Washington.”

It is not hard to imagine Mr. Paul lecturing the president of the Federal Reserve Bank of New York in a committee room: “You can absolutely veto everything the president does. You have the power to veto what the Congress does, and the fact is that you have done it. You are going too far.”

And so it was back in 1964, when that lecture was actually given by the then-new chairman of the House Banking Committee, a Texas congressman named Wright Patman. As Time magazine then wrote: “For three decades, Wright Patman has fumed and fussed that the Federal Reserve system is too secretive, too independent, too insensitive to the hopes of small borrowers. A sharecropper’s son, he often charges that it is a tool of Wall Street bankers.”

A joke during Mr. Patman’s tenure was that the reason he chose a bright red carpet for his office was to hide the blood stains after William McChesney Martin Jr., then the Fed chairman, emerged from private meetings.

The apparent cyclicality of American history and politics is certainly eye-opening; what's even more notable is that even when faced with certain obvious truths, we can be painlessly slow to do anything about them.

The Fed's power has grown incrementally over a period of decades, so gradually as to be imperceptible to most citizens (especially those who do not pay close attention to finance and the markets). But as is often the case, the public seems to be waking up rather suddenly to the truth of the matter--that the Fed has become significantly more powerful than the elected officials we obsess over daily, without being subject to any of the same Constitutional checks and balances.

Time will tell if the Paul/Bernanke debate creates the lasting change that I believe we need (or at least a wider conversation about the role of the Fed), or if it becomes a mere footnote in American history like the Patman/Martin battle decades ago. It is my sincere hope that the former is the case.


[New York Times]