The independent status of the Federal Reserve System

Abstract

The Federal Reserve System is a complex central bank system which determines the money supply and the level of interest rates. The System was established in 1913 as a monetary authority primarily concerned with maintaining an elastic reserve system which would act as a check on bank runs and money panics. Since 1913, Congress has provided the System with monetary tools enabling it to quickly respond to adverse conditions affecting dollar stability and economic growth. All indicators point to an increase in monetary power by the Federal Reserve System simply because economic growth, national and worldwide, calls for more complex monetary mechanics.

Representative Wright Patman (Democrat, Texas) is afraid of the powerful Reserve System. He would like to strip the agency of its power and reduce it to a routine operation with policy decisions made by the Administration. He charges the Board of Governors of the Federal Reserve System with manipulating the money supply and raising the interest rates for the benefit of bankers of the East.

In my thesis, The Independent Status of the Federal Reserve System, I evaluated Mr. Patman's criticisms and his recommended reforms of the System. I have concluded that a continuation of the status of the Federal Reserve System is necessary. Mr. Patman's suggested reforms would invite political interference in monetary affairs and expose the character of our dollar to abuse.