The Daily Gamecock

Rand Paul has proper stance on oversight

Filibuster key in informing public of problems with Federal Reserve

This week’s forecast for the United States Senate: cloudy, with a chance of filibusters.

Rand Paul (R-Kentucky) has promised to filibuster President Obama’s nomination of Janet Yellen as the new chairman of the Federal Reserve. He says he won’t allow a vote on a new Federal Reserve chairman until Senate Majority Leader Harry Reid (D-Nevada) allows his legislation to audit the Federal Reserve to come to a vote as well.

The Federal Reserve is the entity that controls America’s money supply and dictates our fiscal policy. Established in 1913, the “Fed” is a quasi-governmental entity; its leaders are appointed by the President and confirmed by the Senate, but aren’t directly under the control of anyone.

Proponents of this policy draw comparisons between the Fed and judges in our judicial branch — their appointment process is similar, both designed to allow people in these positions to make tough decisions without being constrained to the politics the same way elected officials are.

Opponents of the Federal Reserve, many stirred by former Rep. Ron Paul’s 2009 book “End the Fed,” worry about both the level of power and degree of independence this body has. The Fed is most simply explained as a “banker’s bank” — just as individuals or businesses go to the bank to borrow money in the form of a loan, banks go to the Federal Reserve when they want to borrow money. The Federal Reserve sets a particular interest rate on those loans to banks, and banks in turn borrow more or less money, and therefore offer more or less loans to those individuals and businesses we talked about earlier depending on those interest rates. By manipulating these interest rates (and using several other methods), the Federal Reserve controls our monetary supply, inflation and economic growth.

It’s no coincidence that the two most outspoken critics of the Federal Reserve share a last name — Rand is Ron’s son. Contrary to the name of Ron’s book, this father-son duo does not actually advocate ending the Federal Reserve. Rather, for now at least, they advocate adding some level of oversight to the Fed’s decisions. They stress that Federal Reserve leaders steer our economy from behind closed doors, and are answerable to no one. No one, not Congress, not the President and certainly not the people that have to live in the economy the Fed drives, knows how much money the Federal Reserve gives out, to whom they give it to, or why they give it.

Rand’s audit, a continuation of legislation Ron introduced before retiring, wouldn’t abolish the Fed or give Congress oversight over it. All it would do would open up the books for the first time, allowing economists to get a better picture of how much money the Fed has been pumping into the economy. It’s popular among Republicans (157 cosponsors in the House), has even appealed to a few Democrats (13 cosponsors) and would almost certainly pass the House, should Reid allow it to be brought to a vote in the Senate.

It’s appalling that Rand Paul has to threaten a filibuster to even bring legislation increasing government transparency to a vote. In a democracy, “We the People” have a right to know what our government is doing, especially when it comes to such important economic policy decisions. In his filibuster, Paul will be speaking for all of us who have been kept silent by the Fed’s secrecy. I wish him the best of luck in this honorable endeavor.