Fighting Biden’s dangerous reshaping of the Federal Reserve

Supreme Court appointments dominate the news cycle and “rev up” the engines of partisan politics. This makes sense — lifetime appointments and final say on judicial review and constitutionality touches all our lives. Conservatives seek a court based on strict interpretation of the original Constitution and its core principles. We stand ready to fight the left-wing of the Democratic Party and its plan to expand the court and stack it with far-left progressives who believe that the Constitution is a malleable document, or mere “guidelines.”

Conservatives across the country should be just as animated as President Biden prepares to reshape the Federal Reserve in the months to come. He is expected to nominate a chair of the Federal Reserve Board of Governors imminently and, over the next two months, potentially two vice chairs. Counting the vacant seat on the board and Governor Lael Brainard’s potentially empty seat, the president will have the opportunity to reshape over half of the Federal Reserve Board of Governors in four short years. The independence of the Federal Reserve is on the line.

The president is under significant pressure from the left-wing of his political party to not reappoint Chairman Jerome Powell. And, if his appointees to other important agencies are any indication, conservatives should be very concerned about the destruction of the Federal Reserve’s independence as a central bank, its mandate for price stability, and its important oversight of the U.S. financial system.

It is troubling, for example, that the president nominated law professor Saule Omarova as the Comptroller of the Currency — the nation’s top bank regulator. The professor believes that the Federal Reserve no longer needs to be an independent central bank focused on its congressionally authorized mandates of price stability and full employment. Instead, she favors fully politicizing the Fed; making it a retail commercial bank holding the accounts of all Americans. President Biden’s proposal to weaponize IRS snooping on bank accounts is child’s play by comparison. Professor Omarova, who currently teaches at Cornell University Law School, recently proposed in the Vanderbilt Law Journal to “end banking as we know it.” Professor Omarova’s dangerous views on banking and the role of the Federal Reserve in society make her unqualified for this critical agency appointment to lead the Office of the Comptroller of the Currency and are a troubling leading indicator of what may be acceptable in a Federal Reserve nominee.

Additional evidence is provided by House Budget Committee Chairman John Yarmuth (D-Ky.), who told his committee and the nation that modern monetary theory (MMT) is perfectly fine. Chairman Yarmuth said, “we absolutely cannot go bankrupt because we have the power to create as much money as we need to spend to serve the American people.” Adherence to MMT guts the independence of the Fed and any restraint on congressionally authorized fiscal policy. Rules of financial prudence and political interference are simply thrown out the window and we are left with a Soviet-style integration of federal budgets and the economy. 

Americans are suffering through the worst inflation in 30 years, an episode that administration officials have dismissed as “transitory.” That is dangerous wishful thinking as inflation expectations have steadily risen over the year as households bore the fallout of excessive stimulus dollars chasing too few goods in a landscape dominated by supply chain woes. Appointing governors that would support MMT, the end of the banking system, and the politicization of the central bank will be the end of the rule of law in finance, set the stage for the abandonment of the U.S. dollar as the central anchor in the international monetary system, and open the door to financial failure and rapid inflation.

With so much at stake, conservatives across the country should rally to support Senate Banking Committee Ranking Member Pat Toomey (R-Pa.) in his efforts to ensure that only the most qualified nominees are approved to lead our banking and financial regulatory system. Indeed, senators of both parties should fight for central bank independence and against the failed concept of monetary modern monetary theory.

French Hill represents the 2nd District of Arkansas and is a member of the Financial Services Committee.