As you are aware, H.R. 1207 was introduced in the House of Representatives by Congressman Ron Paul on February 26, 2009. Rep. Paul has long been a vocal critic of the Fed and has supported its abolition for some time. H.R. 1207 would amend title 31 of the United States Code, to reform the manner in which the Board of Governors of the Federal Reserve System is audited by the Comptroller General of the United States and the manner in which such audits are reported.

As you may also be aware, Senator Bernie Saunders introduced S. 153 on March 3, 2009. S. 152 would require the Board of Governors of the Federal Reserve System to publish information on financial assistance provided to various entities.

Since the Federal Reserve Act was signed into law in 1913, the Federal government has had a role in ensuring the integrity of our country’s financial system in order to protect American investors and consumers against such problems as bank failure. The Federal Reserve Board has been granted the authority by Congress to set monetary policy and to regulate commercial banking activities. While the Federal Reserve System was established as an independent agency, the President of the United States appoints the seven members of the board with the appointments subject to confirmation by the Senate. Congress also has the power to modify the Federal Reserve System.

The system also receives extensive feedback from high-level representatives of the public through frequent meetings with members of the Executive Branch and appearances before congressional committees.

While many people have questioned the constitutionality of the Federal Reserve System based upon provisions in the Constitution which give Congress power to “coin money and to regulate the value thereof,” the Congress has appropriately assigned these authorities to government agencies. For example, the Internal Revenue Service (IRS) has been given authority to collect taxes. Similarly, the Federal Reserve System has been delegated authority to establish monetary policy.

The Federal Reserve System is responsive to the needs of the economy, especially the stock market. Compared with virtually all foreign central banks, the Federal Reserve System appears to be very forthcoming in disclosing policies and open to receiving suggestions. Therefore, I am hesitant to support proposals to further erode the independence of the Federal Reserve System or to intrude on the setting of monetary policy. Over the last 25 years, the level of inflation has been quite stable and low, even compared to the period before we created the Federal Reserve.

Rest assured that I will keep your comments in mind should this legislation be taken up by the full Senate.

Again, thank you for writing.

Sincerely,