The Left's Fed Up Makes A Naked Power Grab For Control Of The Fed

A fake gold bar signed by Sean Connery for Gwen, the
 daughter of the dresser in the James Bond film "Goldfinger"
 (AP Photo/Francois Mori via Forbes article)

by Ralph Benko, Contributing Author:  The left is undertaking an amazing back door plan to dramatically increase its influence over the Fed's interest-rate-setting Open Market Committee.

The key activist group, a division of the Center for Popular Democracy, is working to kick the bankers off the boards of directors of the district Federal Reserve banks. Those boards choose the presidents who serve, in rotation, as voting members on the FOMC. Brilliant.

In scope, the left's plan makes trivial by comparison Auric Goldfinger's "Operation Grand Slam" to contaminate America's gold holdings at the US Treasury Depository at Fort Knox. Goldfinger planned to turn them radioactive. Those holdings amounted, in 1964, to about $14 billion. They are now valued at close to $200 billion.

Either way, a tidy sum. Yet it's just a nickel compared to the Fed's more than $4 trillion holdings.

Most impressive. The left is undertaking its own Operation Super Grand Slam.

It is doing so proficiently and systematically. Unfortunately for the left, fortunately for America, it has run into a real life James Bond: House Monetary Policy Subcommittee Chairman Bill Huizenga (R-MI). The irresistible force has met its immovable object.

Fed Up, the left's instrumentality, was repelled during the most recent skirmish. This occurred at a hearing of a subcommittee of the House Financial Services Committee, "Federal Reserve Districts: Governance, Monetary Policy, and Economic Performance."

Fed Up is a project of the Center for Popular Democracy, which, according to Wikipedia (citing a paywalled article by John Judis from the National Journal) is the successor, at least in part, to the somewhat notorious ACORN. According to the Center's website:The Federal Reserve has tremendous influence over our economy. Although our communities continue to suffer through a weak recovery and economic inequality keeps growing, corporate and financial interests are demanding that the Fed put the brakes on growth so wages don't rise. There is a real danger that in early 2015 (sic), the Fed will cut the legs out from the recovery before the economy reaches full acceleration, costing our communities millions of jobs and workers tens of billions in wages.True, and fair, enough. Let it be said that I, along with much of the right, also am highly critical of the Fed. I, a dues paying member of the AFL-CIO, am of the wing of the right wing that is in full solidarity with Fed Up's commitment to wage growth.

We share identification of the Fed as a main perp in the failure of workers to thrive. From the right, for example, check out Put Growth First. Its website is headlined "End the Fed's War on Wage Growth: Restore Prosperity for the Striving Majority."

I, while opposing tokenism, am in sympathy with Fed Up's stand that the Federal Reserve is unacceptably deficient in social, gender, and ethnic diversity. I have great admiration for Fed Up's tactical proficiency, clarity of message, and decency in presenting that message.

That said, I am on record as dubious about the Fed's power to "set" interest rates outside the trivial, and mostly symbolic, impact of setting the discount rate. I also am not part of the "raise interest rates" cheerleader squad on the right. I'm for allowing the credit markets to organically set interest rates based on … wait for it … supply and demand.

I part company with the left on its proposed solution of taking over district Federal Reserve Bank governance. Hola, Venezuela! Upon encountering Fed Up's representatives while we were waiting to enter the Congressional hearing I requested the opportunity to engage in further conversation. Waiting, eagerly, to hear back.

Fed Up is a class act. Making the voices of the have-nots heard is commendable. Bring it on.

We have seen Fed Up's green-shirted protesters in photographs from Jackson Hole with Fed Chair Janet Yellen. Fed Up's operations, according to the Washington Post's Ylan Q. Mui, are materially funded by an $850,000 grant by a billionaire Facebook co-founder:Dustin Moskovitz and his wife, Cari Tuna, have become billionaires since he started the behemoth social networking site with his former Harvard University roommate Mark Zuckerberg. …  The couple is bringing Silicon Valley-style analytics to the world of philanthropy through their fund, Good Ventures.

It has granted $850,000 to the Center for Popular Democracy over the past year to fund a campaign urging the Fed not to raise its target interest rate until the economy is much stronger. Good Ventures is the single largest backer of the campaign — dubbed Fed Up — whose budget this year is about $1 million.$1 million to move $4 trillion? Wow!

Moskowitz and Tuna's money is being well but wrongheadedly spent. Spending low seven figures to attempt to shift a multi-trillion-dollar vector implies, in success, leverage of more than a million to one. That's way beyond what Silicon Valley calls a "unicorn."

It is well beyond the Big Reveal in the Goldfinger movie:Bond: Yes, well, I've worked out a few statistics of my own. 15 billion dollars in gold bullion weighs 10,500 tons. Sixty men would take twelve days to load it onto 200 trucks. Now, at the most, you're going to have two hours before the Army, Navy, Air Force, and Marines move in and make you put it back.
Goldfinger: Who mentioned anything about removing it?
[Bond is stunned into silence]
Goldfinger: The julep tart enough for you?
Bond: You plan to break into the world's largest bank, but not to steal anything. Why?
Goldfinger: Go on, Mr. Bond.
Bond: [thinking] Mr. Ling, the Red Chinese at the factory, he's a specialist in nuclear fission… but of course! His government's given you a bomb.
Goldfinger: I prefer to call it an "atomic device." It's small, but particularly dirty.
Bond: A dirty bomb? Cobalt and iodine?
Goldfinger: Precisely.
Bond: Well, if you explode it in Fort Knox, the… the entire gold supply of the United States would be radioactive for… fifty-seven years.
Goldfinger: Fifty-eight, to be exact.
Bond: I apologize, Goldfinger. It's an inspired deal! They get what they want, economic chaos in the West. And the value of your gold increases many times.
Goldfinger: I conservatively estimate, ten times.
Bond: Brilliant.Brilliant.

Subcommittee Chairman Bill Huizenga chaired the recent House Financial Services Committee hearing with a suave "shaken, not stirred" demeanor. Let us also acknowledge House Financial Services Committee Chairman Jeb Hensarling, who quietly sat in on most of that hearing. Cast Hensarling as Bond's boss, Sir Miles Messervy, head of the Secret Intelligence Service, more conventionally known as "M." The House stymied Fed Up.

With Fed Up we are looking at leverage not of a factor of ten but a factor of a million. Brilliant, yet grandiosity alone is not enough.

Pity that if Fed Up succeeded in hijacking bank governance it would most likely produce "economic chaos," especially for workers. Somewhat comparable measures deeply injured the workers of Venezuela.

Huizenga distilled the essence of his chairmanly refutation of Fed Up's position at CNBC.com's Democrats plot hostile takeover of the Fed via Dodd-Frank:Recently, the Democratic Party Platform spelled out a plan for … disenfranchising any of the Districts' shareholding banks from the election of directors. Democrats falsely claim this will preserve the Federal Reserve's independence, but governance experts see it for what it is – a naked grab for central control.

Should this coup succeed, District Bank directors would be selected not for their interest in increasing economic opportunity wherever it shows promise, but rather in channeling resources to where they maximize political favor.

Worse than a pretense of knowledge, the Democrat's platform demands a duplicitous straightjacket, consigning people to partisan dependence instead of reliably supporting their opportunity to flourish.Coup is quite right. Nice championship of Main Street over Wall Street by Huizenga. Bonus, nice allusion to Hayek's 1974 Nobel Prize acceptance speech, The Pretence of Knowledge. Brilliant.

That said, there may be an unnoticed opportunity lurking here. Fed Up commands:The entire Federal Reserve System should be subject to external reviews and disclosure requirements just like every other key public agency.  The Government Accountability Office should produce a regular annual review of the Fed's policies, procedures, management, and operations. Such reviews will identify key shortcomings, risks, and opportunities for improvement and will facilitate appropriate congressional oversight.If Moskowitz and Tuna want to help Fed Up produce a Facebook-like super-unicorn — rather than the policy equivalent of GeoCities.com — let them whisper this news into the ear of Fed Up's field director, Shawn Sebastion. The House late last year passed legislation to this very effect: FORM, the Fed Oversight Reform and Modernization Act of 2015.
With Fed Up's support FORM could be enacted into law. Now.

This legislation now reposes in the Senate Banking Committee, presumably awaiting a signal that five or so Democratic U.S. Senators would support it (as a very significant number of House Democrats repeatedly voted in support of "Audit the Fed," part of FORM). A quiet phone call from a few progressive thought leaders, such as Moskowitz and Tuna, to Senator Warren to invite her support could well precipitate a reform of historic proportions.

FORM is something around which the left and the right can reasonably unite. Win-win. And America wins.
Unlike Auric Goldfinger, the Center for Popular Democracy will surely live to go up against Chairman Bill "Bond" Huizenga again.

That said, an historic opportunity beckons. If Fed Up moves quickly, now, the left and the right can unite to impose transparency on the Fed.

Thereafter the left surely will continue its efforts to make a "hostile takeover of the Fed." So it goes.

The julep tart enough for you, Mr. Bond?
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Ralph Benko is senior advisor, economics, to American Principles in Action's Gold Standard 2012 Initiative, and a contributor to the ARRA News Service. Founder of The Prosperity Caucus, he was a member of the Jack Kemp supply-side team, served in an unrelated area as a deputy general counsel in the Reagan White House. The article which first appeared in Forbes.

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