The Federal Reserve is responsible for implementing U.S. monetary policy. As it directs the world's largest economy, the Fed earns top rank among powerful institutions. Though the central bank guides state monetary policy, the Fed is largely a private institution. As such, bank operations move in secrecy, absent of oversight from the public arena. Thanks to Carmen Segarra, however, we now have some keen insight to the inner operations of the Federal Reserve System.
Segarra was recently employed at the New York Fed as a bank examiner, charged with ensuring the bank followed internal regulations and conducting "oversight" of the economic powerhouse. During her tenure, Segarra grew suspicious that the Fed was rather lenient with powerful, well-connected investment banks - notably Goldman Sachs (a key player in the 2008 financial crisis). To document her concerns, she recorded 46 hours of private meetings and conversations. Her recordings reveal the Fed is, in fact, rather cozy with the financial institutions it's supposed to regulate. With evidence in hand, Segarra voiced her objections. She was soon fired.
Segarra joined the ranks of other whistle-blowers and leaked her recordings to Jake Bernstein, an investigative reporter from ProPublica, and to the public radio program This American Life. In an interview with NPR, Bernstein notes: "These are people who work inside the banks. They see these people every day, and they need to obtain the information from these banks, and it's easier to obtain the information if you're friendly and if you have a good relationship, but sometimes that can slide to deference." The tapes reveal much, such as back-room deals described as "shady" by Fed officials, but at their heart the recordings tell the story of a corrupt culture within the central bank.
A "slide to deference" is not the proper description. Theft is more accurate - the theft of labor, property, and security from the populace, in the form of bailouts and "too big to fail" economic policy for the benefit of the state capitalist system.
Because of the leaks, U.S. Senator Elizabeth Warren (D-MA) is trumpeting the call for a corruption investigation into the Fed. She is joined by her Democratic colleague Sherrod Brown. Such calls are folly.
State-sanctioned economic privilege has long been granted to big business and the financial sector under the premise that these institutions are necessary for social organization. The financial sector is separate from, but intimately related to, the state. As such, the economy of the nation-state is directly linked to these institutions. This relationship forges a corporatist political economy in which the state has direct interest in the success of these now "too big to fail" concentrations of capital - the state must keep "capitalism" stable for its own preservation.
Regulation is thus a waste of time, energy, and taxpayer dollars.
Those of us on the market left, however, oppose the very concentrations of power and capital that allow "too big to fail" institutions to exist in the first place. We believe social power, liberated of state-capital symbiosis, should steer the market. We envision decentralized and participatory systems of governance and economics. There is no room for archism in a social order of liberty and free association.
Those who head the Fed, and other would-be regulators, imagine they can design economic systems. The problem is markets, like all human behavior, are not structured for the command and control mentality; markets are spontaneous. The desire for control of economic systems necessarily requires the restriction of human labor and innovation. The liberated market, in contrast, with power diffused to the public arena, requires liberty and the inclined labor of human beings. It's far past time we end the Fed and actualize the economics of liberty.
Grant Mincy is a fellow at the Center for a Stateless Society (C4SS.org) and blogs at appalachianson.wordpress.com. He holds a chair on the Energy & Environment Advisory Council for the Our America Initiative.