GOP Lawmaker Introduces Bill to Abolish the Federal Reserve

The seal of the Federal Reserve Board as its appears outside the Fed's William McChesney Martin Building in Washington on March 13, 2023. (Alex Wong/Getty Images)

Rep. Thomas Massie (R-Ky.) has introduced legislation to end the Federal Reserve, the U.S. central bank responsible for managing the country’s financial and banking system.

The bill titled the “Federal Reserve Board Abolition Act” or “End the Fed” seeks to abolish the Federal Reserve System by dismantling its board of governors and the Federal Reserve banks. The legislation also aims to repeal the Federal Reserve Act, which created the Federal Reserve System in 1913.

In introducing the bill, Mr. Massie criticized the Fed’s monetary policies for record-high inflation.

“Americans are suffering under crippling inflation, and the Federal Reserve is to blame,” Mr. Massie said in a statement on May 16. “During COVID, the Federal Reserve created trillions of dollars out of thin air and loaned it to the Treasury Department to enable unprecedented deficit spending. By monetizing the debt, the Federal Reserve devalued the dollar and enabled free money policies that caused the high inflation we see today.”

The Federal Reserve System, also known as the Fed, was initially founded in 1913 in response to banking panics at the time. Over the following century, its powers have expanded to include regulating and overseeing banks and maintaining financial system stability. The Fed’s major function is implementing U.S. monetary policy. According to the Fed, its primary objectives include maximizing employment, stabilizing prices, and moderating long-term interest rates.

Mr. Massie also blamed the Fed for colluding with the executive and legislative branches, as well as Wall Street, for the financial problems Americans are now facing.

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“Monetizing debt is a closely coordinated effort between the White House, Federal Reserve, Treasury Department, Congress, Big Banks, and Wall Street,” Mr. Massie said. “Through this process, retirees see their savings evaporate due to the actions of a central bank pursuing inflationary policies that benefit the wealthy and connected. If we really want to reduce inflation, the most effective policy is to end the Federal Reserve.”

If enacted, the bill will allow one year for the Fed to be shut down. In addition, the Federal Reserve Act will be repealed, and its assets and liabilities will be liquidated. The Director of the Office of Management and Budget will be responsible for the liquidation process.

The Federal Reserve Board Abolition Act was first introduced in 1999 by then-Rep. Ron Paul (R-Texas). The legislation was reintroduced every single year until his retirement in 2013.

The legislation’s cosponsors include Reps. Andy Biggs (R-Ariz.), Matt Gaetz (R-FLa.), Marjorie Taylor Greene (R-Ga.), Scott Perry (R-Pa.), Rep. Chip Roy (R-Texas), and 15 others.

Besides the “End the Fed” Act, Mr. Massie, a Libertarian who favors limited government and lower taxes and opposes high government spending, has also introduced the Federal Reserve Transparency Act of 2023 to require a full audit of the Federal Reserve.

The Fed Under Criticism

Since its creation, the Fed has faced increasing scrutiny and criticism over its controversial role in the U.S. economy.

The most notable critic of the Fed is late Nobel laureate and economist Milton Friedman, who on multiple occasions called for abolishing the Fed for its ineffective policies, saying “It’s done more harm than good.”

In one interview, Friedman said, “There is no institution in the U.S. that has such a high public standing and such a poor record of performance.”

Last year, E.J. Antoni and Peter St Onge, research fellows at The Heritage Foundation, published an article titled “Time To End the Fed and Its Mismanagement of Our Economy,” which lays out the argument for ending the Fed. According to the authors, “Every major economic downturn of the last 110 years bears the mark of the Federal Reserve. In fact, as long as the Fed has been around, it has swung the economy between inflation and recession. Yet Americans, surprisingly, have tolerated it.”

Argentine President Javier Milei, an economist, drew headlines last year with his promise during his presidential campaign to abolish the country’s central bank, calling it “the worst garbage that exists on this Earth” and ”one of the greatest thieves in the history of mankind.”

“Central banks are divided in four categories,“ he said during an interview with Bloomberg last year. ”The bad ones, like the Federal Reserve; the very bad ones, like the ones in Latin America; the horribly bad ones; and the Central Bank of Argentina.”

Last year, Mohamed A. El-Erian, an economist and former CEO of investment management fund PIMCO, also criticized the Fed for its failures.

“The U.S. Federal Reserve’s growing list of policymaking, supervisory, and communications failures is becoming increasingly consequential not just for Americans but also for the rest of the world,” he wrote in an article for Project Syndicate. “The global economy’s single most important institution has lost its way.”