of the United States in enforcing the law and preserving equality, soundness, and solvency in commercial banking. The provisions of the original Federal Reserve Act obviously contemplated a high degree of independence for members of the Board. Thus, in addition to the requirement that they shall be appointed only with the consent of the Senate, it gave them 10-year terms,16 provided for the staggered expiration of terms so that there would be occasion for the appointment of a new member only once every 2 years, and made them removable by the President only "for cause." The length of the term of office was extended to 12 years by the Banking Act of 1933, and was further extended to 14 years by the Banking Act of 1935. Constitutional considerations As the result of early decisions of the Supreme Court of the United States upholding the power of Congress to establish the Bank of the United States as "a convenient, a useful, and essential instrument in the prosecution of its fiscal operation," it is now well settled that Congress has constitutional authority to employ any means appropriate for carrying out its credit and monetary powers-its powers "to coin money" and "regulate the value thereof," "to borrow money on the credit of the United States," and "to lay and collect taxes." In 1913, in order "to furnish an elastic currency" and for other monetary purposes, Congress enacted the Federal Reserve Act. Instead of utilizing one of the executive departments as it might have done or a single central bank as had been done in foreign countries, Congress established the Federal Reserve System, consisting of 12 regional banks operated for public purposes and subject to the overall supervision of a governing board which was described by the Attorney General shortly after the passage of the law as "an independent board or government establishment." 18 In considering the question whether this or any other Government establishment created by Congress should be placed in the legislative, executive, or judicial branch of the Government, it should be borne in mind that the constitutional doctrine of separation of powers as between the three branches of the Federal Government is not a rigid but a flexible and qualified doctrine which is often difficult to apply to particular cases. Chief Justice Marshall in an early case observed that "the difference between the departments undoubtedly is, that the legislature makes, the executive executes, and the judiciary construes the law." 19 Frequently, however, these powers merge into one another and it is not always possible to say definitely whether a particular power is executive, legislative, or judicial. Moreover, even if the nature of a particular power can be determined, it is clear that the separation of powers doctrine does not demand the drawing of sharp. lines of demarcation between the powers of the three branches of 16 It is of interest here that when the Comptroller General's office was set up in 1921 and consideration was being given to his term of office, one Member of Congress compared that office with membership on the Federal Reserve Board in that "both classes of officials have important duties to perform, which are strictly nonpolitical, and they should be entirely removed from politics." (Congressional Record, vol. 61, p. 1081.) 17 McCulloch v. Maryland, 4 Wheat. 316, 422 (1819). See also Osborn v. Bank of the United States, 9 Wheat. 738 (1824). 18 30 Op. Atty. Gen. 308, 311 (1914). 19 Wayman v. Southard, 23 U.S. 1, 44 (1825). Government, but recognizes that these powers may be blended and interconnected.20 In some cases, Congress has created Government agencies which perform rulemaking functions as agents of the legislative authority and which also exercise functions quasi-judicial in nature. The Board of Governors of the Federal Reserve System is such an agency. The most important functions of the Board are those affecting the money supply. Among these are the Board's authority to review and determine the discount rates established by the Reserve banks with a view to accommodating commerce and business; to change the reserve requirements of member banks in order to prevent injurious credit expansion or contraction; and to prescribe such margin requirements with respect to securities as it deems appropriate for the accommodation of commerce and industry "having due regard to the general credit situation of the country." In the same category are the responsibilities imposed upon the Federal Open Market Committee for directing the open market operations of the Federal Reserve banks with a view to accommodating commerce and business and with regard to their bearing upon the general credit situation of the country. In these and other respects, the Board and the Open Market Committee prescribe rules and determine policies as agents and on behalf of the legislative branch. On the other hand, certain of the Board's functions are quasi-judicial in nature, such as those which it has in connection with administrative hearings and decisions. On the basis of the nature of its functions it may be that for certain purposes the Board can be regarded as an agency of one branch of the Government and for other purposes as an agency of another branch. The power of Congress to establish agencies to perform quasijudicial or quasi-legislative functions is unquestioned. It is also clear that Congress may constitutionally vest such agencies with authority to exercise independent judgment in discharging their duties. In the case of Ilumphrey's Executor v. United States, holding that Congress could constitutionally restrict the Presidential power of removal as to members of the Federal Trade Commission, the Supreme Court of the United States expressly declared that "the authority of Congress, in creating quasi-legislative or quasi-judicial agencies, to require them to act in discharge of their duties independently of Executive control cannot well be doubted." 22 In this connection, the Supreme Court stated: 23 The Federal Trade Commission is an administrative body created by Congress to carry into effect legislative policies embodied in the statute in accordance with the legislative standard therein prescribed, and to perform other specified duties as a legislative or as a judicial aid. Such a body cannot in any proper sense be characterized as an arm or an eye of the Executive. Its duties are performed without Executive leave and, in the contemplation of the statute, must be free from Executive control. *** [Italics supplied.] As stated in the Federalist Papers, unless the three branches of the Government "be So far connected and blended as to give to ach a constitutional control over the others, the degree of separation which the maxim requires, as essential to a free Government, can never in practice be duly maintained." (Essay No. 48.) 295 U.S. 602 (1935). 22 295 U.S. 629. 295 U.S. 602, 628. Regarding the intent of Congress in enacting the Trade Commission. Act, the Supreme Court declared: 24 Thus, the language of the act, the legislative reports, and the general purposes of the legislation as reflected by the debates, all combine to demonstrate the congressional intent to create a body of experts who shall gain experience by length of service-a body which shall be independent of Executive authority, except in its selection, and free to exercise its judgment, without the hindrance of any other official or any department of the Government * * [Italics in original.] * The Board of Governors, of course, operates in a different field from that of the Trade Commission and with respect to different subject matters. As previously indicated, however, in performing many of its most important functions, the Board exercises rulemaking powers as the agent of the legislative authority; and in certain other respects the Board performs quasi-judicial functions. The Federal Reserve Act and its legislative history show the intent of Congress that the Board shall exercise its own judgment and discretion in performing its duties. Consequently, if occasion should ever arise for judicial determination of the status of the Board, it would appear that, if the principle of the Humphrey's case is followed, the courts would hold that the Board is authorized to carry out its important reserve banking functions in accordance with its own independent judgment, "free from Executive control." In any event, irrespective of the branch of Government in which judicial determination might place the Board and the Open Market Committee, such determination would not affect their authority to exercise the discretion vested in them by Congress. Where officials of the Government, including those in the executive branch, are charged by law with the performance of duties involving the exercise of discretion, the courts have held that the decisions of such officials are not subject to review or revision by the President. While it is the President's duty under the Constitution to "take care that the laws be faithfully executed," nevertheless, as stated by the Supreme Court in an early case, *** it by no means follows [from the President's duty to "take care," etc.] that every officer in every branch of that [executive] department is under the exclusive direction of the President. * * * * it would be an alarming doctrine that Congress cannot impose upon any executive officer any duty they may think proper, which is not repugnant to any right secured and protected by the Constitution; and in such cases the duty and responsibility grow out of and are subject to the control of the law, and not to the direction of the President.25 Conclusion In the absence of an authoritative court decision on the subject, no definitive answer can be given to the question submitted as to the particular branch of Government in which the Board and the Open Market Committee may fall. Regarless of what answer may be given 24 295 U.S. at p. 625. 25 Kendall v. United States, 12 Peters 610 (1838). This principle has often been recognized by the courts, the Attorneys General, and the Presidents themselves. As early as 1823, Attorney General Wirt stated: "But the requisition of the Constitution is, that he [the President] shall take care that the laws be executed. If the laws, then, require a particular officer by name to perform a duty, not only is that officer bound to perform it, but no other officer can perform it without a violation of the law; and were the President to perform it, he would not only be not taking care that the laws were faithfully executed, but he would be violating them himself." 1 Op. Atty. Gen. 624, 625 [Italics in original.] to this question, however, it would not affect the authority and duty of the Board and the Committee to exercise their own best judgment and discretion, subject to the statutory restrictions and mandates imposed by Congress, in performing their responsibilities under the law. This is not to say, of course, that the Board and the Open Market Committee are not parts of the Federal Government or that they are intended to function entirely apart from and without regard to other agencies of the Government. On the contrary, they seek always to consider the policies of agencies functioning in related fields, as well as the programs and policies of the President, to the end that the policies of the Federal Reserve System and other Government agencies may be integrated to the greatest extent practicable. They also endeavor to cooperate with other agencies in considering common problems and in exchanging helpful information. What has been said above as to the independent status of the Board and the Committee should not be interpreted as implying that the Federal Reserve System is a static or immutable organization. The System should be, and it is believed that it has been, a flexible institution with capacity for growth and adaptation to new developments. It has been and should be modified by Congress from time to time to conform to changing conditions. In this respect Chief Justice Marshall's words that the Constitution was intended "to be adapted to the various crises of human affairs" might well be applied to the Federal Reserve System. In whatever ways it may be modified or adapted to changing conditions, it is essential to the effective performance of the System's unique functions that the independence of judgment reposed by Congress in the Board and the Open Market Committee be preserved (S. Doc. 123, pt. 1, 82d Cong. 2d sess., pp. 242-248). JOINT STATEMENT OF THE FOLLOWING REPUBLICAN MEMBERS OF THE HOUSE BANKING AND CURRENCY COMMITTEE ON PROPOSALS AFFECTING THE FEDERAL RESERVE SYSTEM Clarence E. Kilburn, New York Florence P. Dwyer, New Jersey W. E. (Bill) Brock, Tennessee PROPOSALS AFFECTING THE FEDERAL RESERVE SYSTEM The people of the United States might well be concerned about the value of their dollars as revealed by a series of moves by Democratic Members of the House of Representatives. First, Representative Patman introduced a bill on January 15 (H.R. 9631) designed to destroy the independence of the Federal Reserve System by making it subordinate to the Treasury. The bill would make the Secretary of the Treasury the Chairman of the Board of Governors and the Chairman of the committee having responsibilities related to money and credit conditions. It also provides that any member of the Board of Governors may be removed by the President at any time. Other provisions of the bill would materially change the organization of a system which has earned the respect of the world. Now comes a House resolution by Representative Rains dictating a course of action to the Federal Reserve that it should follow after the passage of the tax bill. This series of pronouncements makes adequately clear that certain members of the administration are embarking on a path of attempted domination of the monetary authority by the Congress and of inflation to try to cure the economic ills of the Nation both real and imaginary. It seems imperative that President Johnson promptly disavow this course which time and again has robbed the worker of the fruits of his labor. It is necessary that the other nations of the world who hold large amounts of dollars and who could demand delivery of our gold for these claims be given assurance that a perversion of our central bank and that inflation shall not be a policy of this Nation. A complete rejection of these proposals would give this assurance. SUGGESTED COMMENT FOR MR. PATMAN ON REPUBLICAN PRESS RELEASE In all my years in the House I have seen no more remarkable statement than the press release issued today by a number of minority members of the Committee on Banking and Currency. That statement objected to the hearings just begun which will represent the first thoroughgoing study of the Federal Reserve System in 50 years. That statement said that the Banking Committee has no business investigating the keystone of our banking system, the Federal Reserve Board and the Federal Open Market Committee. The Constitution places in the Congress the responsibility for the creation and control of money and the rules of the House place on my committee the heavy responsibility of supervising the banking system and recommending legislation. The fact is, we would be most derelict in our duties if we failed to make this study. The minority members who signed this statement are apparently fearful of the facts we may uncover and presume to predict the course of our investigation. This is the first time I have heard of a pig squealing before it is stuck. The minority members will have every opportunity to voice their views in the course of these hearings, and I believe that any sense of fairplay dictates that they await the results to see whether or not they still feel there are any grounds for objecting. Mr. MARTIN. Let me make one final comment on the hearings in general. You know, you and I have exactly the same objectives. We both want to reduce unemployment and raise the standard of living, and bring about equilibrium in the balance of payments. The CHAIRMAN. You leave off one phrase. |