by Ken Masugi
On the identity politics that used to be known as “civil rights” Sleepy Joe is fully woke.
Just as he prioritized sex and race identity for his vice presidential pick, Joe Biden would racialize his monetary policy by remaking the Federal Reserve banking system. Biden is thereby the most identity-focused candidate in American history since the 19th century. And with the force of the Democratic Party behind him, he lacks any guard rails.
Anyone troubled by arbitrary presidential power should beware of Biden’s ambitious plan to remake the Federal Reserve banking system, which would make the Fed even more independently powerful, but now on racial issues, and would compound the problems with both the Fed and the growth of racialized politics.
Already suspect because of its “independence” from politics—which means freedom from the fundamental principle of the consent of the governed—the Federal Reserve raises suspicions of favoring this or that special interest no matter what it does or fails to do. Trump is not the first president to heap criticism on even his own appointee as chairman.
Biden’s radical change would channel the anger of racialized politics into the Fed’s mission of sober policymaking on interest rates and other concerns of a central bank.
Biden has proposed that Congress amend the Federal Reserve Act to “add to that responsibility and aggressively target persistent racial gaps in jobs, wages, and wealth.” To achieve this revolution, he would prioritize “diverse nominees for the Board of Governors and the regional Federal Reserve Banks.”
The economics of the Fed would become chiefly political. Its board of governors would no longer set interest rates for the common good but for particular factions in public life. The Biden proposal is a prime example of how a faction gets a hold of part of the government and bends its purpose to its own narrow good. There will be no Madisonian compromises of groups toward a common good.
Dwarfing Affirmative Action
The radicalism of Biden’s proposal becomes clear from Senator Elizabeth Warren’s bill, introduced days after his speech. The ultra-progressive Massachusetts senator’s Federal Reserve Racial and Economic Equity Act, cosponsored by the likes of Senators Bernie Sanders (I-Vt.) and Richard Blumenthal (D-Conn.) and, in the House, Maxine Waters (D-Calif.), Al Green (D-Texas), Chuy Garcia (D-Ill.), and Ayanna Pressley (D-Mass.). This is predictable since Warren, as a Harvard Law professor, was the prime-mover the legislation establishing the Consumer Finance Protection Bureau (CFPB), which supposedly protects the little people from avaricious banks, but which has grander ambitions about putting the economy under bureaucratic control.
The latest Fauxcahontas-Biden bill includes three parts: first, a requirement that the Fed carry out its functions in a way that “minimizes and eliminates racial disparities in employment, wages, wealth, and access to affordable credit”; second, a requirement that the Federal Reserve chairman identify in his reports before Congress “disparities in employment, income and wealth across racial and ethnic groups”; third, a requirement that the Fed and the Open Market Committee work to foster “elimination of disparities across racial and ethnic groups with respect to employment, income, wealth, and access to affordable credit,” extending to monetary policy, bank regulation, and financial institutions.
This may sound like mere reporting of data but note the “shalls” and the requirements. This is a setup for mandated policy conclusions that dwarf affirmative action, quotas, and other old standbys.
As Rush Limbaugh put it, “the Federal Reserve would be transformed into an all-powerful social-justice enforcement agency. Using racial fairness as a cover, Democrats want to give the Fed a new mission: force banks and financial markets to adopt the radical Left’s socialist agenda.”
Ripe for Corruption
And of course, the Left will benefit themselves while professing to do good for others: co-sponsor Maxine Waters, Jacob Heilbrunn reminds us, was named “one of the most corrupt members of Congress,” for violating House conflict of interest rules concerning a bank in which she had a financial stake. It should come as no surprise that Warren was the genius behind the agency this new one would imitate.
Finally, the fiendishness of using the Fed for anti-democratic purposes becomes clearer in light of a Supreme Court decision from this past term, Seila Law LLC v. Consumer Finance Protection Bureau.
The 5-4 decision permitted the Trump Administration to fire the acting head of the agency but declined to declare the oddly constructed board to be unconstitutional. The law establishing it (known as Dodd-Frank, the Dodd being former Senator Christopher Dodd, who headed Biden’s vice-presidential selection committee) made the bureau so independent of political pressure that even its funding, from the Fed itself, could not be controlled by Congress.
Justice Clarence Thomas, in his partial dissent, explained the issue well:
The Constitution does not permit the creation of officers exercising “quasi-legislative” and “quasi-judicial powers” in “quasi-legislative” and “quasi-judicial agencies.” No such powers or agencies exist. Congress lacks the authority to delegate its legislative power, and it cannot authorize the use of judicial power by officers acting outside of the bounds of Article III. Nor can Congress create agencies that straddle multiple branches of Government.
Unfortunately, Chief Justice Roberts would not join the conservatives in finding the CFPB unconstitutional. In it Congress has created an uncontrollable monster, wielding unchallengeable powers with funding that it cannot alter. This is the ultimate progressive government dream, a putatively reform-minded agency beyond all political pressures.
Ultimately, Warren would create an entity similar to CFPB that would, unabated by political pressure (that is, by elected officials) bring about a world of economic equality for all. Thus the last few weeks have revealed who Joe Biden is—not “sleepy” at all, this most “woke” of candidates is in a vanguard ahead of Elizabeth Warren’s radical ideas and Kamala Harris’s opportunistic rhetoric. He would distort the heart of American finance and transform the nation’s basic economic structure using the mantra of “civil rights” and equality. This is socialism camouflaged in bureaucratic garb.
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Ken Masugi, Ph.D., is a senior fellow of the Claremont Institute. He has been a speechwriter for two cabinet members, as well as for Clarence Thomas when he was chairman of the Equal Employment Opportunity Commission. Masugi is co-author, editor, or co-editor of seven books on American politics. He has taught at the U.S. Air Force Academy, where he was Olin Distinguished Visiting Professor; James Madison College of Michigan State University; the Ashbrook Center of Ashland University; and Princeton University.
Photo “Joe Biden” by Gage Skidmore. CC BY-SA 2.0.