Politico reports that:
Rand Paul traveled to Des Moines, Iowa, recently and delivered a sure-fire applause line. “Anybody here want to audit the Fed?” the Kentucky senator asked. “Anybody feel that the Fed’s out to get us?”
He followed it up with an op-ed comparing the Federal Reserve to Lehman Brothers and calling it essentially bankrupt. The bash-the-Fed routine, perfected by Paul’s father, former Texas congressman Ron Paul, is political gold with libertarian voters suspicious of all federal authority, especially a central bank with a $4.5 trillion balance sheet.
But Paul could face a significant challenge if he emerges from Iowa with a legitimate shot at the Republican nomination. … And the establishment wing of the GOP — backed by piles of Wall Street money — views Paul’s approach to the Fed as dangerous and irresponsible.
Politico is on to something. But it’s not so much about some “libertarian” voters as it is with populist (small ‘r’) republicans. They, as in some ways does Dr. Paul, represent a recurring political force whose roots go back at least to Thomas Jefferson and Andrew Jackson, two very successful presidents.
Jefferson mortally opposed to the Fed’s original predecessor, the First Bank of the United States, successfully pushed by Treasury Secretary Alexander Hamilton. Jackson mortally opposed its successor, the Second Bank of the United States, and effectively closed it down. As noted in a publication by the Federal Reserve Bank of Philadelphia:
Secretary of State Thomas Jefferson…was afraid that a national bank would create a financial monopoly that would undermine state banks. He also beleived that creating such an institution was unconstitutional. Also, such an institution clashed with Jefferson’s vision as a chiefly agrarian society, not one based on banking, business, and the pursuit of profit.
As for President Jackson, as published by the Lehrman Institute’s timeline on the matter:
Tennessee’s Andrew Jackson … crusaded, successfully, … against the Second Bank of the United States ….
Jackson had a long-time hatred of banks and a deep commitment to hard money. When Kentucky Senator Henry Clay pushed for early rechartering of the Second Bank of the United States as a prelude to a presidential campaign against Jackson in 1832, Nicholas Biddle, president of [the Second Bank of the United States] went along. The legislation passed Congress, but Jackson overruled key members of his own cabinet in his willingness to veto the bill. In his message vetoing a bill re-chartering of the Second Bank of the United States, Jackson wrote:
… I sincerely regret that in the act before me I can perceive none of those modifications of the bank charter which are necessary, in my opinion, to make it compatible with justice, with sound policy, or with the Constitution of our country. …
It is to be regretted that the rich and powerful too often bend the acts of government to their selfish purposes. Distinctions in society will always exist under every just government. Equality of talents, of education, or of wealth can not be produced by human institutions. In the full enjoyment of the gifts of Heaven and the fruits of superior industry, economy, and virtue, every man is equally entitled to protection by law; but when the laws undertake to add to these natural and just advantages artificial distinctions, to grant titles, gratuities, and exclusive privileges, to make the rich richer and the potent more powerful, the humble members of society – the farmers, mechanics, and laborers – who have neither the time nor the means of securing like favors to themselves, have a right to complain of the injustice of their Government. There are no necessary evils in government. Its evils exist only in its abuses. If it would confine itself to equal protection, and, as Heaven does its rains, shower its favors alike on the high and the low, the rich and the poor, it would be an unqualified blessing. In the act before me there seems to be a wide and unnecessary departure from these just principles.
Politico frames the controversy over Sen. Paul’s stand to “audit” the Fed as one between, as President Jackson wrote, “the humble members of society – the farmers, mechanics, and laborers – who have neither the time nor the means of securing like favors to themselves” and practices designed to make “the rich richer and the potent more powerful” – the moneyed interests of Wall Street.
Analysts such as AEI’s James Pethokoukis champion strong central banking and critique Sen. Paul, “‘He seems to be moving to the position of abolishing or severely limiting the actions of the Fed,’ said Pethokoukis. ‘Every other advanced economy has a central bank. We are going to somehow do something different? That’s going to strike a lot of business people and people on Wall Street as a very extreme and not very responsible position to take.’” Sen. Paul, meanwhile, asks the voters: “Anybody feel that the Fed’s out to get us?”
This debate reprises a venerable and recurring battle repeatedly fought over, and once again in political play, in American history. Joining ranks with Jefferson and Jackson tends to elevate, rather than diminish, the stature of Rand Paul. Herman Hupfeld was right. “The fundamental things don’t change as time go by.”
Ralph Benko, internationally published weekly columnist, co-author of The 21st Century Gold Standard, lead co-editor of the Gerald Malsbary translation from Latin to English of Copernicus’s Essay on Money, is American Principles in Action’s Senior Advisor, Economics.