Last Updated Jul 21, 2009 7:13 PM EDT
Actually, try Wright Patman, circa 1963. The longtime congressman for decades attacked the Fed as a secretive, unaccountable cabal of elites who ignored the interests of average Americans. As chairman of the House Banking Committee in the early 1960s, Patman launched a comprehensive review of the Fed. Like Paul, a fellow Texan and populist firebrand, Patman wanted to hobble the agency by subordinating it to the Executive branch. According to some historical accounts, then-Fed chairman William McChesney Martin had to cut a deal with President Lyndon Johnson under which LBJ agreed to quash Patman's investigation (what is it about Texans?) in exchange for the Fed maintaining low interest rates, which was necessary to help finance the escalating war in Vietnam.
All this to say that battles over the Fed's "independence" from politics go way back, virtually to the time of its creation in 1913. In the latest salvo, Paul wants to pass a bill that would require the Fed to submit to government audit, giving taxpayers a sense of what fiscal beasts might be lurking in its balance sheet. It's not the first time that Paul, who like Patman contends the Fed is beholden to financial interests, has gone after the agency, and in the past he's made noises about abolishing it altogether. Those efforts never went anywhere, especially when Alan Greenspan was turning the Fed into his own cult of personality.
Ah, but what a difference an epic financial meltdown can make! Paul's measure has considerable support on Capitol Hill, uniting Paul and other libertarian cranks, free market fundamentalists like John Boehner, progressive crusaders like Dennis Kucinich, and even more moderate members of the tribe. If these partisans share bipartisan consensus on one thing, it's that the Fed screwed up -- first, by not spotting the flames licking at the financial system, then by failing to act decisively to put out the blaze (although they disagree on what started the fire in the first place).
Not coincidentally, this urge to shackle the Fed coincides with the White House's proposal to anoint the agency as, in the lingo of the moment, a "macroprudential regulator" charged with bleeding off systemic risk. In Washington, where turf is everything, great power comes not only with great responsibility, but also with greater congressional oversight.
Question is, to oversee what, exactly, and at what cost? The usual argument for an autonomous Fed is that it insulates monetary policy from politics. According to this theory, it's a good idea to keep government's greedy mitts off the piggybank. A sensible notion, given that politicos' myopic focus on short-term goals, like raising money and getting re-elected, often conflicts with longer term concerns such as adjusting interest rates and otherwise keeping the economy on course.
Makes sense, right? But independence at the Fed has always skewed closer to an ideal than to reality. The agency is far from immune from political pressure, as the LBJ and many other episodes illustrate. Critics also point to the Fed's proclivity for trimming its sails around election time in deference to whatever ruling party is at the helm. Most important, the Fed's role is changing. As construed by the Obama administration, the agency's new mandate goes far beyond its original mission of setting monetary policy to include policing the entire financial system.
And while Fed governors may not be directly accountable to the political class, in recent years they have generally shared a common philosophy on the markets, financial regulation and how to sustain economic growth. What does it mean to be independent if everyone shares the same core beliefs?
Fine, the Fed wasn't the only financial supervisor who blew it. Every regulator from the Treasury on down willfully ignored the danger signs, as did most lawmakers and economists. But only the agency's staunchest defenders, or someone trying to save his skin, would argue that the Fed performed well, or even adequately, as the bubbles were forming.
So Paul has a point. Given the Fed's recent dismal track record and growing power in shaping economic policy, a little more public oversight is in order.