The Federal Reserve System (Fed) is a centralized banking system used in the U.S. Its members include the nation’s banks as well as the government. The Fed has many functions, like issuing national currency and controlling monetary policy. In some of these functions, it shares responsibilities with other agencies like the Federal Deposit Insurance Corporation (FDIC). However, when it comes to its most important function, regulating the control of the nation’s money supply, it has complete autonomy within the government.
The Fed is also self-funding in that its income stems from bank holdings of income-generating securities. A good deal of this income is generated from U.S. government held securities. However, in this area the Fed is not subject to the congressional appropriations process. The Chairman of the Board of Governors of the Fed has enormous power over the nation’s money supply. When the economy is booming, like it has been for most of the Clinton administration and was during some of President Reagan’s years in office, experts are often divided as to who deserves the credit for the success “Occasionally, during arguments over whether Ronald Reagan should be given credit for the robust economy of the mid-80’s someone will pipe up, no, no it’s really Paul Volcker. In these days, on innumerable pundit fests, a Republican partisan will credit the 105th Congress with today’s economy, a Democratic partisan will ask for some credit for the Clinton administration, and then someone might interject, nope, it’s Alan Greenspan” (Suarez 1).
There are many who argue that the Fed has too much independence. Just the perceived threat of Alan Greenspan raising short-term interest rates (the amount it costs banks to borrow money overnight from other banks with reserves) can send the government, Wall Street, and corporate America into a panic. Further, the Chai
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