One of the problems that anyone who is critical of the Federal Reserve System faces is the fact that he is regarded as someone without any expertise in the area of money and banking.
In a 2009 article, the Huffington Post went into considerable detail about the number of people with PhD degrees in economics employed by the Board of Governors of the Federal Reserve System. This is the government’s branch of the Federal Reserve. It is not one of the 12 regional Federal Reserve banks, all of which are privately owned. The Board of Governors at the time the article was written had 220 full-time economists on its staff. The author did attempt to find out how many economists are on the payroll of the 12 regional banks, but he could not. These are major institutions. Each of them publishes its own monthly magazine.
In terms of the number of people with PhD degrees in economics who specialize in money and banking nationally, there may be as many as 1500, but it could be as few as 1000. Anyway, that was the case in 2009. So, we’re talking about a situation in which perhaps as many as a third of all the specialists in the field are employed by some branch of the Federal Reserve. But this is only the tip of the iceberg. The Federal Reserve has part-time contracts that it doles out to economists in the field. It sets aside almost half a billion every year to pay economists. That is an enormous amount of money to flow in the direction of a single profession.
The article concluded that the Federal Reserve has basically bought control of the field. Almost nobody challenges the Federal Reserve in any serious way.
Here’s a situation in which the agency that controls monetary policy for the United States has an unlimited amount of money to buy support, compliance, or least silence within that segment of professionally trained economists that specializes in money and banking. The Federal Reserve gets to keep all the money that it wants for operations. It has to turn back over to the Treasury Department any money that is not used for operations, but it does not answer to Congress or the Treasury with respect to how it spends its money. This means that the Federal Reserve has essentially unlimited funds available to buy off those critics who might challenge Federal Reserve policy.
The Federal Reserve System is a cartel. It operates for the benefit a relatively small number of banks, probably fewer than two dozen, which constitute at least 80% of all bank deposits in the United States. Really, the Federal Reserve is dealing with about a dozen of these enormous banks. It does not answer to close to 7,000 small banks. They have no clout. They have so few deposits, compared to the giants, that whether they survive or not is basically irrelevant to the Federal Reserve System.
The organization is truly untouchable today. It has never been audited by an agency not employed by it. It is not going to be audited. Nobody knows how much gold is in it. Nobody knows what liabilities or claims against this gold there are. In other words, the central agency that controls the central economic institution in modern society, meaning commercial banking, is beyond control of the vast majority of those banks, and it is beyond the control of Congress. No President ever challenges the Federal Reserve System.
Under these circumstances, what possible effect does criticism from outside the Federal Reserve have? We know how much effect it has. None. If Congress, which is supposedly in charge, does not have the votes to get an audit by the Federal Reserve by the Government Accountability Office, then the Federal Reserve is truly independent of the government. It may go along with a particular presidential administration, but it does not have to.
I do not think there is any other institution in the United States that has this degree of autonomy from government. It proclaims itself as independent of government. It is lauded in the textbooks because it is independent of the government. I am aware of no other institution in the United States whose main claim to fame is that the federal government has no control over it. In textbooks written by leftist authors who want to see control, or least severe regulation, over every aspect of the capitalist economy, they all give a free ride to the Federal Reserve System. In this one case, they pull back from their ideological position, and they claim that the great advantage of the Federal Reserve is its independence from politics. This is completely contradictory to the party line of the American Left, yet there are almost no deviants from this party line.
(To read the rest of my article, click the link.)