HOUSE BILL REPORT

SB 5444

BYSenators Moore, Metcalf, Vognild, Pullen, Conner, von Reichbauer, Bender, Barr, Talmadge, Deccio, Johnson, Garrett, Owen, Rasmussen, West, Smitherman, Patterson, Craswell, Tanner, Nelson, Bailey, Bauer, Zimmerman, Hayner and Sellar

Challenging the delegation of authority to create money.

House Committe on Financial Institutions & Insurance

Majority Report:  Do pass.  (12)

      Signed by Representatives Lux, Chair; Zellinsky, Vice Chair; Betrozoff, Chandler, Crane, Dellwo, Ferguson, P. King, Meyers, Niemi, Silver, and Winsley.

House Staff:John Conniff (786-7119)

AS PASSED HOUSE APRIL 14, 1987

BACKGROUND:

In 1913, Congress adopted the Federal Reserve Act, creating the Federal Reserve System.  Subsequent amendments to the act have substantially increased the Federal Reserve's powers.  Currently, the Federal Reserve has extensive regulatory authority over banking, credit and monetary supply.  This authority includes the power to establish and monitor bank reserve requirements, to control the growth of money, to regulate banks and to enforce consumer credit laws.  In 1978, Congress adopted the Full Employment and Balanced Growth Act, which directed the Federal Reserve to maintain the long-run growth of the monetary and credit supplies to promote the goals of maximum employment, stable prices and moderate long-term interest rates.

The Federal Reserve system is composed of the Board of Governors, and 12 Federal Reserve banks, the Federal Open Market committee and other advisory committees.  The Board of Governors of the Federal Reserve is composed of nine members appointed by the President and confirmed by the Senate.  The Federal Reserve banks are owned by member banks located in each of 12 Federal Reserve districts.  The board of directors of each Reserve bank is composed of nine members, six of whom are elected by the member banks and three of whom are appointed by the Board of Governors.  The Federal Open Market Committee is composed of the seven members of the Board of Governors and five presidents of the 12 Reserve banks.

The Board of Governors has general control over the entire Reserve System and promulgates the regulations for the system.  The Federal Open Market Committee effectuates monetary policy.  The committee generally exercises control over the money supply through the purchase and sale of U.S. government securities.  The Reserve banks are responsible for oversight of member banks within its district, lend money to member banks and operate check processing facilities, among other functions.

Funding for the Federal Reserve is accomplished through assessments on Federal Reserve banks, and no appropriation from Congress is necessary to support the Federal Reserve or to authorize spending by the Federal Reserve.  The Comptroller General of the United States has the authority to audit the Federal Reserve System, but no government agency is permitted to audit the Reserve's monetary policies or actions.  In addition, an independent national accounting firm audits the Federal Reserve's accounts annually.

SUMMARY:

An attorney selected by the legislature is directed to cause an action to be filed with the U.S. Supreme court challenging the constitutionality of Congress' delegation of the power to create money to the Federal Reserve System and an action requiring a complete, independent audit of the Federal Reserve System.  The bill shall be submitted to Washington voters for acceptance or rejection at the next general election.

Fiscal Note:      Attached.

House Committee ‑ Testified For:    Senator Jack Metcalf, Howard Schaefer, Walter Buller, and Homer Anders.

House Committee - Testified Against:      None Presented.

House Committee - Testimony For:    Congress is delegated the power to create money not the Federal Reserve Board.  The Federal Reserve Board performs many functions which Congress is required to perform.  This bill would give Washington citizens the opportunity to choose whether or not Washington state should challenge this unconstitutional exercise of power.

House Committee - Testimony Against:      None Presented.