Notice & Comment

Central Banks? Why?, by Janet Monteros

A sincere thank you to Peter Conti-Brown for his efforts to reach the public in his book The Power and Independence of the Federal Reserve.

First, I begin by revealing that my practice is far removed geographically and figuratively from those who ponder the rationale for the power and independence of the Federal Reserve.

My practice is in the El Paso, Texas – Juarez, Mexico, “Paso Del Norte Region,” with a population of over two million people. Thus, some may consider my opinion as coming from left field!

Not as nuanced as the symposium contributors, I will begin with a very simple premise: Why do we even have a central bank? Haven’t some countries been able to survive without this organizational set-up? Isn’t there a tremendous amount of mystery, half-truths circulating, and even legends about what the Federal Reserve Bank should or shouldn’t do?

In furtherance of the disconnect, people are still having problems with the banks; business and personal loans are still hard to come by down in the trenches where most people live. People, if it is even thought through, view it as akin to the electoral college: why is it still there?

There is the question of ultimate relevancy to the fellow on the street, and even more pronounced in our immigrant population, to the effect that a new banking system has been formed among the distrustful. For example, the “sou sous” system or the “colina” system: informal savings clubs where a trusted person in a group of savers becomes the point person who collects the funds (cash only) from a group of trusted regular savers to be placed in a common fund. The funds are then disbursed as a lump sum to one of the savers at every cycle. The cycle is predetermined to be what the group decides upon, whether 6, 10 or 18 months. The first saver gets a disbursement that is interest-free cash and for the last saver it a no-interest savings plan. The system operates on an honor system so the invitation to join is a very selective process. The existence of these types of banking systems in the fourth degree of removal from the median belies the sense of distrust of those in the trenches of society where the Federal Reserve is not even a reality.

Additionally, the impressive structure of the Federal Reserve system as examined by Conti-Brown brings to mind the ringing quote from Madison, The Federalist, No. 47:”The accumulation of all powers, legislative, executive and judiciary, in the same hands, whether of one, a few, or many, and whether hereditary, self-appointed, or elective, may justly be pronounced the very definition of tyranny.” This leads to an examination of the Chevron deference and the nondelegation doctrine as applied to the Federal Reserve system, which again calls to mind what Conti-Brown is bringing to light. How did this happen? Or more to the point, how can this “happen” in such a veiled fashion from public discourse?

With the light provided in Conti-Brown’s analysis, a more pointed examination of when the implicit delegation began growing its legs along with the executive branch shifting from an advisory role to a more of a quasi-law maker and interpreter. How were the roots of these incremental outgrowths operating to fill in gaps, resolving ambiguities growing into tap roots with little public notice? Conti-Brown’s book is helping to fill those gaps.


Janet I. Monteros, MBA, JD, is a state government attorney certified in the practice of administrative law by the Texas Legal Specialization Board.

This post is part of an online symposium reviewing Peter Conti-Brown’s new book The Power and Independence of the Federal Reserve. You can read the entire series, as well as other posts on the Federal Reserve, here.

Print Friendly, PDF & Email