The New Right and the Fed

Since 2016, the New Right—a collection of conservatives opposed to the older, “fusionist” GOP—has sought to evict the “uniparty” from the halls of power. Should former President Donald Trump return to the White House, that campaign will continue in earnest. Plans like Schedule F could see the removal of thousands of bureaucrats deemed to be allies of the Old Regime, and various think tanks, along with the Trump campaign itself, have reams of individuals ready to fill those positions and remake America’s governing institutions.

But one institution has mostly escaped the New Right’s wrath: the Federal Reserve. Incredibly powerful and very independent, it holds immense sway over Americans’ everyday lives and living standards. For example, if the Fed decides to raise rates—or keep them raised—that means higher credit card bills and bigger mortgage payments. Rates have a huge impact on the stock market as well, and serve as a broader indicator of economic health: always a contentious political football around election time. That it has avoided falling into serious disrepute among the higher-ups in the MAGA movement is something of a mystery, as banking issues have long been central to most major historical American populist movements.

America’s very first populist revolution was brought about by Andrew Jackson. The former president transformed American politics, shifting the country away from the one-party morass it had settled into and toward a democratic fulfillment of the promises of the Founders. The jewel of his efforts was his war on the Second Bank of the United States. A congressionally chartered corporation, the Bank had effective control over the monetary policy of the United States. It could mint currency and had control over state banks, with effectively no oversight from elected officials.

Jackson loathed the bank, seeing it as unconstitutional and undemocratic. It had some (five out of 25) presidentially appointed directors, but elected officials had no real say over its policies; it listened more to wealthy stockholders than to democratically elected politicians. When he vetoed its recharter in 1832, he wrote: “It is easy to conceive that great evils to our country and its institutions might flow from such…power in the hands of a few men irresponsible to the people.” From then on until the early 20^th century, America would have no permanent central bank.

This did not stop banking and economic issues from playing a major role in American populism, of course. The second great populist uprising of the 1800s birthed the very term “populist” (from the American Populist Party, also called the People’s Party). Among other things, the movement—mostly of rural Americans, particularly farmers—sought the free coinage of silver, as they believed the gold standard empowered the rich at the expense of the indebted poor, who hoped that inflation (which the coinage of silver, a cheaper metal than gold, would cause) would increase the price of their crops. Some populists and populistically inclined politicos, such as William Jennings Bryan (of “Cross of Gold” fame) even reluctantly supported the existence of a central bank—provided it would not be controlled by bank interests.

The problem is that the Federal Reserve was, from the ground up, controlled by bank interests. Although it was created by Woodrow Wilson when he signed the Federal Reserve Act of 1913, the actual plan—from which most of the Federal Reserve was derived—came about in 1910. It was that year when six men—two politicians and four rich bankers—met in secret on an island off Georgia’s coast to create a new banking system. The participants would not actually reveal the secret meeting until the 1930s. This all sounds like a conspiracy theory out of Ron Paul’s worst nightmares, but it’s entirely true: The above is a summarized version of what can be found on the Federal Reserve’s own history page.

The institution they created was barely more democratic than the defunct Second Bank of the United States. The Fed’s board of governors are appointed to 14-year terms by the president—and that’s it. No confirmation process. No outside input. And their 14-year terms mean that, if a given populist movement wants to rid the Federal Reserve of the influence of old ideologies, they need to wait a decade and a half.

All decisions are up to the board, other lower directors, and stockholders. The various presidents of the federal reserve branches fall under this umbrella: instead of being picked by elected officials, they are nominated by lower “classes” of Fed directors, who themselves are picked by the member banks. It’s an incredibly difficult process to parse, and it is incredibly, deeply, anti-democratic.

Ostensibly, the Federal Reserve was created to save the country from recurring economic panics. But just 16 years after its creation, America was struck by the Great Depression, which only really ended once World War II took off. The Fed then failed to stop multiple serious recessions, including the economic nightmare of 1970s-era stagflation. It also failed to foresee or quickly end the Great Recession, from which America had a painfully slow recovery.

The bank is also—doubtlessly much to the late Jennings Bryan’s chagrin—extremely close with the banking industry. Janet Yellen, the current Secretary of the Treasury, served as Chair of the Federal Reserved until 2018. In the brief three year period between leaving that job and taking up her current post, she made $7 million in speeches to major financial institutions like Goldman Sachs (one speech netted her nearly $300,000). Yellen is clearly an expert in her field—but she is not the kind of eclectic speaker who is worth $300,000 to hear from. To an outside observer, it would appear that the banking industry knew that she represents their interests, and were—to use a financial phrase—making an investment in their future.

As president, Trump reportedly—and with good reason—saw himself as Jackson’s populistic successor, and one would think the comparisons—a movement seeking the overthrow of a uniparty dominating all levels of government—would lead 21^st century populists to, like their forbearers, question central banking once again. But while economic issues—such as the imposition of tariffs—have played a large role in New Right discourse, none of its champions have targeted the Federal Reserve.

Why? Part of the New Right’s unwillingness could come from an instinctive desire to distance themselves from the economic libertarians they have worked so hard to wrest party control from. For decades, going after the Federal Reserve has been a mostly libertarian endeavor, and it may still smack as too much of one.

But it is also possible that the New Right, amidst a series of culture war battles, has forgotten its roots. While the populist-right took off with Trump’s win, it had its genesis in the Great Recession. The recession’s immediate aftermath witnessed the birth of two competing movements: the left-wing Occupy movement and the right-wing Tea Party. Both movements were originally driven by economic anger over the 2007-2008 bailouts and the insularity of America’s economic system.

The American carnage, to quote Trump’s inaugural address, wrought by the recession jolted many on both sides, especially as those who ran the banks escaped justice with golden parachutes. Almost ten years after the worst of the crash, when Trump delivered that inaugural, one could imagine he was speaking explicitly about those events: “Washington flourished – but the people did not share in its wealth. Politicians prospered – but the jobs left, and the factories closed. The establishment protected itself, but not the citizens of our country.”

But the energy which created the Tea Party was immediately hijacked by two separate forces. First was the influence of free-trade and anti-tax libertarians like Grover Norquist and the Koch Brothers, who spent millions of dollars convincing angry Americans that the real economic culprits were high corporate tax rates and a lack of free trade agreements with Latin America.

Second, as journalist Batya Ungar-Sargon discussed in her well-researched book, Bad News, in the early 2010s, media organizations quickly started talking about culture war issues—such as racism in policing and LGBT issues—and both sides took the bait.

So, what should be done? As Trump will, if he is elected in November, only have four years in office, ending the Federal Reserve is likely out of the question. Corralling enough recalcitrant Republican senators—many of whom are still aligned with old ways of thinking—would be extremely difficult, especially for a president who cannot run for another term. He will also be swamped with other concerns.

But it would behoove his administration to at least lay the groundwork for serious future reforms, which could be carried out by a future president aligned with the New Right. And there are already some bills in Congress which could help grease the skids. One, for example, is the “Audit the Fed” bill which is currently pending before Congress. The bill has libertarian cosponsors (like Senator Rand Paul) and more establishment figures (like Senator Chuck Grassley); with presidential support, it could feasibly pass a GOP-controlled House and Senate.

Such a bill would not cause immediate changes, of course. But it would force the Fed to open its books to the American people—and the results could give New Right figures the political momentum they need to wrest back powers which were mistakenly handed away long ago. If that goal remains far off, at least it will shine a light on a political institution deeply in need of public scrutiny.