Criticism of the Federal Reserve

Criticism of the Federal Reserve System has existed since its inception in December 1913 by the Federal Reserve Act. The system was the third attempt to establish a central bank in the U.S. ( see History of the Federal Reserve System ). The Federal Reserve Act - a law of 1913, which established the Fed as the still valid U.S. Federal Reserve System - was first discussed on party lines, after U.S. President Woodrow Wilson significant political pressure on members of Congress had exercised to obtain a permission.

The earliest debates on central banks in the United States focus on their constitutionality, the private status of the banks and to the question of the extent to which the economy should be centrally controlled. Some of the best known early critics were Thomas Jefferson, James Madison and Andrew Jackson. The criticism is primarily due to the fact that it is private companies in the member banks and owners of the Federal Reserve Bank. Critics such as the Republican Congressman Ron Paul to complain today that the private-sector impact of these member banks is too big through the establishment of the Fed Federal Reserve on monetary and interest rate policies of the United States. Woodrow Wilson is said to have the law called after his term as repeated errors.

Great Depression of 1929

Perhaps the most widely accepted criticism of the Fed was first put forward by Milton Friedman and Anna J. Schwartz: The Fed has exacerbated the recession of 1929 and so triggered the Great Depression. After the stock market crash in 1929, the Fed further limited the amount of money and refused to save banks from collapse. This error resulted in the opinion of the critics to the fact that a relatively mild recession ended in disaster. Friedman and Schwartz suggest that depression was " a tragic testimony to the importance of monetary forces."

Global financial crisis from 2007

Some economists such as John Taylor argue that the Fed is at least partly responsible for the housing bubble in the United States: The Fed had interest rates kept too low after the recession of 2001, supporters of the Austrian School of economic theory give the Fed to blame for the economic crisis. in the late 2000s, especially under the leadership of Alan Greenspan and by credit expansion with historically low interest rates from 2001, which led in turn to the United States to the housing bubble and finally to the global financial crisis from 2007. The criticism intensified after the Troubled Asset Relief Program in 2008.

In November 2009, Senator Chris Dodd brought by the Democratic Party in the United States Senate a bill on the path that restrict the powers of the Fed and should create a new regulator for the banking sector. According to Senator Dodd, who was also chairman of the Senate Banking Committee, the Fed had " failed all along the line " in dealing with the current financial crisis. Risky business of the banks, which led to the financial crisis, were not inhibited by the Fed. With his bill, he stood against the attitude of the U.S. administration of President Barack Obama.

The theme was also the most important subject of public discussion during the mid-term elections in the United States, 2010. Critics who responded to the Troubled Asset Relief Program in 2008, the bailouts for the big banks, insurance companies and mortgage lenders, as well as the industrial companies General Motors and Chrysler, reached a wide audience.