Chairman Hensarling's Promise: To Tackle the Fed

Ralph Benko
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Posted: Dec 03, 2013 12:01 AM
Chairman Hensarling's Promise: To Tackle the Fed

House Financial Services Committee chairman Jeb Hensarling, after his introduction by Cato CATO -0.96% Institute vice president Mark Calabria at a panel of the 31st annual Cato Monetary Conference, had effusive praise for his host:

I do want to thank the Cato Institute for everything they stand for and everything they have meant to me. … I would like to tell you that the senior leadership of the House Financial Services Committee before we decide to move out on any particular issue we certainly glean the scholarship of Cato ….

Hensarling impressed a packed, and savvy, house with a thoroughgoing analysis of how federal regulators helped precipitate the late financial crisis. Hensarling went on to criticize the Federal Reserve’s role in the disaster, in particular pointedly noting its deviation from the Taylor Rule.

Mr. Hensarling proceeded briefly to present a litany of regulatory agency failures. This was a display of erudition about such matters that imply that iconic Sen. Phil Gramm has successfully mentored this rising star, Hensarling. Saying “we dream bold dreams in America,” the chairman announced an ambitious agenda for the House Financial Services Committee. Hensarling then extensively addressed questionable Fed regulatory practices.

He then delighted the audience by pivoting to a new, welcome, topic.

Hensarling:

Last but not least, I would like to say … I think we all know … it is the hundredth anniversary of the creation and founding of the Federal Reserve. …

So I wish to tell you, and we will have a formal rollout in the month of December which is the true hundredth anniversary, that the House Financial Services Committee intends to reexamine all conventional wisdom dealing with the Federal Reserve without necessarily preordaining the conclusion. … So we had a hearing yesterday dealing with alternative models of different international central banks. …

And not the least of which is the entirety of their [the Fed's] hundred year history and what America has looked like since adopting a fiat currency.

The news that Chairman Hensarling would be turning his committee’s attention to these matters was startling and welcome. Hensarling chairs the House committee with jurisdiction over proposed legislation constituting a Commission now actively being encouraged by Cato: HR 1176, the Centennial Monetary Commission.

There had been some uncertainty, among monetary reform proponents, about whether Mr. Hensarling would consider apt the proposed Commission’s charter to produce a thorough empirical Report with recommendations for the Fed. Would he take precious committee time to hold hearings, a precursor to bringing the Commission to a vote in committee?

It is difficult to interpret Hensarling’s declaration to hold hearings on “the entirety of their hundred year history and what America has looked like since adopting a fiat currency” as anything but an intention to bring the Commission up for a vote. Hensarling promises to process vast amounts of information. The constraints on a committee hearing, and on a committee staff, cannot do such a huge topic justice. As Rep. Kevin Brady put it in his own remarks at Cato, a “brutally bipartisan” Commission — with Hensarling a Commissioner — is called for.

The terms of the Centennial Monetary Commission designate the Chair of the Committee on Financial Services (or another majority member designated by him) — yes, Mr. Hensarling himself — as one of the Commission’s twelve voting members. Thus, if enacted, the Commission will provide Mr. Hensarling with a distinguished venue from which to deliver on his promise to the Cato officials and audience … and to the Fed itself. …

Hensarling:

I was privileged to have breakfast with Chairman Bernanke a couple of months ago and told him we would offer a birthday present to the Fed and that would be the most rigorous oversight plan they have seen in their entire history.

How much does Cato care about the Commission? The panel following Mr. Hensarling’s was entitled “The Case for A National Monetary Commission and Fundamental Reform.” It was moderated by public intellectual Dr. Judy Shelton, co-director of the Atlas Economic Research Foundation’s Sound Monday Project … and featured Rep. Kevin Brady, chairman of the Joint Economic Committee and prime sponsor of just such a commission, Dr. Gerald P. O’Driscoll Jr, Senior Fellow, Cato Institute, and R. David Ranson, president of Wainwright Economics.

Cato’s enthusiasm for the Monetary Commission already was in evidence. Dr. James Dorn, Cato’s Vice President for Monetary Studies wrote in the Orange County Register last September,

It is time to judge the Fed’s 100-year history and to consider the constitutionality of a pure discretionary fiat money regime. Rep. Kevin Brady, R-Texas, drafted a bill to create a Centennial Monetary Commission. That is a step in the right direction. We should assemble the best monetary minds and have a real debate over the fundamental flaws in the Federal Reserve System, not just a debate over who will be the next Fed chairman.

Cato Senior Fellow Gerald P. O’Driscoll, Jr., in his remarks at the panel following that of Mr. Hensarling’s, also hailed the proposed Commission as a “step in the right direction.”

Cato, by deed, appears to be making enactment of the Commission a top priority agenda item. On December 10 Cato is conducting a Capitol Hill briefing entitled The Fed’s 100th Anniversary and the Case for a Centennial Monetary Commission. It features Cato’s president John Allison. It will be moderated by James A. Dorn, Cato’s Vice President for Monetary Studies. Participating? Kevin Brady. And Norbert Michel, Research Fellow of the Heritage Foundation.

Cato is sending people from its A-Team bench … with a critical assist from Heritage. The stated purpose? To make the case: “for creating a Centennial Monetary Commission (HR 1176) to explore alternatives to the current pure discretionary government fiat money regime.”

The message hardly could be clearer.

Heritage, in an article by Dr. Michel posted to Heritage’s influential The Foundry: “In fact, maybe it’s time for Congress to formally review the Fed’s monetary policy. A great place to start would be Congressman Kevin Brady’s (R–TX) Centennial Monetary Commission Act of 2013(H.R. 1176).”

Cato and Heritage hardly are alone in their enthusiasm for the Commission, which has been a priority for American Principles in Action (with which this columnist is professionally affiliated) since before its official inception. The Commission recently was the subject of a call to action by the iconic Weyrich Lunch, leading to signings (in their personal rather than institutional capacity) of 16 civic leaders. Signers included such powerhouse civic leaders as Morton Blackwell, Colin Hanna, and Richard Viguerie. Powerful social conservative leaders as Bob Record, executive director of the Council for National Policy, Gary Bauer, president of American Values, and Jim Backlin, a leader of the Christian Coalition, and many others, signed. (As did this columnist.)

The Weyrich Lunch’s call was preceded by a call to action for the Commission from the influential Conservative Action Project, entitled To Grow the Economy, Get Monetary Policy Right. This called a national monetary commission — promised in the 2012 Republican platform — a critical agenda item for the 113th Congress. This Memorandum for the Movement moreover was signed by powerful figures such as the Honorable Edwin Meese III, the Honorable David McIntosh, the Honorable Chris Chocola, the Honorable Becky Norton Dunlap, Grover Norquist, Brent Bozell, Bill Walton, key national Tea Party leaders Jenny Beth Martin and Amy Kremer, and several dozen other civic leaders. (And was signed by this columnist).

Does Mr. Hensarling intend to use his December hearings as a precursor to bringing the Centennial Monetary Commission to a vote? Hensarling, as a Monetary Commissioner, would serve a prominent, possibly historic, role. To bring it up for a vote would respond to insistent calls from throughout the conservative movement. Bringing the Commission up for vote unequivocally would demonstrate the respect Mr. Hensarling proclaims for Cato Institute.

Best of all, the Centennial Monetary Commission would allow Mr. Hensarling to make good on his promise to Ben Bernanke: “a birthday present to the Fed and that would be the most rigorous oversight plan they have seen in their entire history.”

Respectful memo deriving from the GOP Platform from Conservatives, Libertarians, and Tea Partiers, among others, to the Honorable Jeb Hensarling:

Bring HR 1176 up for a vote in the House Financial Services Committee.