After all, here are the same people who brought us the $160 billion-plus thrift debacle, now wanting to try their economic genius on the money policy of the United States.
But in fact the Constitution gives monetary policy authority to Congress, although lawmakers have delegated that power to the Fed since 1913. Moreover, the congressional proposals themselves are not created equal.
Rep. Stephen Neal, D-N.C., has introduced a bill requiring the Fed to eliminate inflation in five years - a measure endorsed by Fed Chairman Alan Greenspan.
However, more concern has been generated by Reps. Lee Hamilton, D-Ind., and Byron Dorgan, D-N.D., who advocate giving the Treasury secretary a seat on the Fed's Open Market Committee. This would allow the administration a voice on the Fed's influential and super-secret policy committee.
Hamilton also wants to let Congress examine the Fed budget, and allow each president to name a new Fed chairman; now the chairman serves a four-year term and cannot be removed by the president. Other House members want additional measures to reign in the Fed, including adding representatives of consumers, small-business people, farmers and builders to the board.
Critics rightly worry that these measures would politicize the central bank and usurp its independence.
Hamilton has a point, that the Fed operates without the checks and balances characteristic of the Republic. This is deliberate: the Fed was established to take control of the money supply out of the hands of the private New York bankers. It was refined to blunt efforts by politicians to manipulate the central bank.
Yet the Fed, which often deals in murky theoretical waters, has hardly been infallible. In the wake of the Crash of '29, Fed tightening of the money supply played a major role in causing the Great Depression.
In the '70s, after President Nixon took the U.S. off the gold standard, the central bank did a poor job of managing the paper currency. Fed officials, as well as others in government, used inaccurate Keynesian economic models as a guide for policy. …