by Adam Puff

Created on: July 06, 2010   Last Updated: July 07, 2010

A FRINGE POSITION BY CONGRESSMAN PAUL

In the United States Congress, there is a bill, sponsored by Representative Ron Paul, called the Federal Reserve Board Abolition Act. It is co-sponsored by no one else, and as such it isn’t going anywhere anytime soon. What the bill would do is provide a one year period for the Federal Reserve to be dismantled. It ensures that compensation would be given to all employees for their work and provides for the liquidation or assumption by the U.S. Treasury of all assets and liabilities of the Federal Reserve.

Ron Paul’s position on the Federal Reserve has been cast as “fringe,” usually along with the implication that being “fringe” makes something inherently wrong. Paul’s position is certainly outside the mainstream. Americans are very comfortable with the existence of the Federal Reserve. The dollars that Americans carry are “Federal Reserve Notes.” It has been in place since 1913 and, despite heavy criticism from time to time, there has been no serious opposition in government to its existence.

THE STRUCTURE AND PURPOSE OF THE FEDERAL RESERVE BOARD

The Federal Reserve has four general mandates. First, it is the principle actor in the United States monetary policy. It influences credit conditions for the purpose of minimizing unemployment, ensuring stable prices, and keeping interest rates reasonable over the long term. Second, it is a regulatory body meant to address the issue of banking panics. It attempts to ensure the safety of the nation’s financial system while striking a balance between the private interests of banks, the centralized responsibility of the government, and the “credit rights” of consumers. Third, it is a safety net meant to contain systemic risk in financial markets. Fourth, it provides financial services to the federal government, foreign official institutions, and major banks.

The Federal Reserve has the power to lend money. It is considered to be the “lender of last resort,” extending credit to banks when a lack of credit may have an adverse affect on the economy. The Federal Reserve itself puts its lending policy this way:

“The Federal Reserve implements U.S. monetary policy by affecting conditions in the market for balances that depository institutions (private banks) hold at Federal Reserve Banks … by conducting open market operations, imposing reserve requirements (telling banks how much liquid cash

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