The Federal Reserve’s Conflict

The Federal Reserve has a conflict of interest in its very mandate. The new financial Dodd-Frank regulation law has tilted the effect of the Fed in many ways, giving the executive branch of government much more influence on the Fed.

Despite the logic for the Fed’s independence, Congress always has wanted to impose influence. It has to an extent. Since 1978 the Fed has had to enforce the Full Employment and Balanced Growth Act, known as Humphrey-Hawkins. That conflicts with the Fed’s stated currency/inflation activity.

The Humphrey-Hawkins Full Employment Act enforcement creates an inflating bias; certainly not one of dollar stability. So there is always a conflict of interest.

Remember, the Fed handles monetary policy. The president, through the Treasury Department, is in control of fiscal policy. It’s difficult for the Fed to control outlandish spending by the government.