The Federal Reserve

Alexander Hamilton wanted a central bank to stabilize the economy since the federal government took on all the states' Revolutionary War debts. Thomas Jefferson was adamantly opposed to a central bank. So, the idea was never put forward at the birth of this nation.

Years later, during the Panic of 1907 — when people rushed to withdraw their money from banks — many realized the weakness of the U.S. banking system. Thus, in 1913, the Federal Reserve was created. The Board of Governors of the Federal Reserve System consists of seven members who are nominated by the President and confirmed by the Senate. Members can serve only one 14-year term. A new member is nominated every two years, as the term expirations are staggered. In 2017, President Trump nominated Jerome Powell to the position of Chair of the Federal Reserve. His term began in February 2018. In addition to the seven appointed members, there are 12 regional Reserve Bank presidents selected locally to give states a voice in policy.

Most agencies answer to Congress because Congress controls the budget. But the Fed is budget-independent. Its income comes from interest payments, U.S. government securities and bank fees. This keeps it from being in a political harness due to congressional dependence.

A major job of the "Fed" is to control the money supply, manage inflation and promote economic growth through changes in interest rates. It also helps regulate financial institutions and acts as a lender of last resort during crises. The Fed provides services such as check clearing, wire transfers and electronic payments.

At present, Trump is upset with Jerome Powell. He wants the Fed to lower interest rates to make borrowing cheaper, which could stimulate the economy. This could lead to increased spending and investment, and potentially drive up the stock market. However, the increased spending could cause a higher demand for goods, which might lead to rampant inflation.

Though it has never been done, the President does have the power to remove a Fed Chair or Board member. However, there are strict guidelines for doing so: malfeasance, neglect of duty or inefficiency. Policy disagreement is not a justification for dismissal. Trump is a great businessman, but the Federal Reserve needs to remain independent. Not every monetary policy will be popular, but the Fed must make decisions that are in the long-term best interest of the economy.

Regina Curtis

Citrus Springs