by Marty Carbone

Created on: November 02, 2008

Should the United States abandon the Federal Reserve?

NO - we should CONTROL the Federal Reserve.

In order for this country to survive and prosper, the American monetary and banking system must be regulated in accordance with the Constitutional mandate of a balance between legislative, judicial and executive power: The Federal Reserve, a privately owned and managed corporation that answers to nobody, must be removed from the sole creation, control and regulation of our money. That removal can be accomplished by (a) putting the banking system under the direct control of the President or Congress or (b) leaving the Federal Reserve System in place but surrounding it with strict, transparent regulations passed as law by Congress.

Either (a) or (b) above could work - but (a) is impractical because Congress and the President do not have the skills needed to directly administer the monetary and banking systems. They would have to set up an agency or agencies to do the day-day work. They might as well rebuild the existing Federal Reserve and (to repeat myself) control it by strict, transparent regulations passed as law by Congress

The following statements, A to D, sum up what is now wrong with the system

A) The present system is in violation of the Constitution because it does not provide for Congress having the power to "coin money and regulate the value thereof" as specified at Article 1 / Section 8 of the Constitution of the United States.

B) The present regulation of the money supply by the Federal Reserve System, a privately owned entity, costs the Federal Government and the taxpayers about 400 billion dollars interest every year.

C) The present system almost always results in an unbalanced federal budget.

D) The existing Federal Reserve System has no checks and balances. The Fed reports to Congress, but Congress does not have any practical power to efficiently control the Federal Reserve System in any way.

Here, for example, is one simple problem (a to c below) that recently reverberated catastrophically through our monetary and banking systems.

(a) Existing lending rules allow banks controlled by the Federal Reserve System to negligently, and perhaps fraudulently, sell off shaky home loans.

(b) They are negligent because the banks have a legal obligation to make sound loans.

(c) They are fraudulent because the banks are purposefully avoiding their implied contractual obligations to Congress and thus to the American People.

This problem can easily be solved by simple one-page legislation that would mandate all bank loans must be held by the originating bank until the loan is paid off or canceled by some legal means.

Unless those lending rules are changed, no government action will correct the problem.

Allowing banks to sell off shaky house loans protects the banks from any losses on those loans and encourages the negligence of their responsibilities to run a fair, honest and equitable banking / lending system.

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