[ The government’s least democratic branches are incompetent and
corrupt because they are unaccountable. James Madison would not be
surprised…]
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THE FED, THE SUPREME COURT, AND THEIR LEGITIMACY  
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Max Moran
May 5, 2023
American Prospect/The Revolving Door Project
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_ The government’s least democratic branches are incompetent and
corrupt because they are unaccountable. James Madison would not be
surprised… _

, Graeme Sloan/Sipa USA via AP Images

 

_The Revolving Door Project, a _Prospect_ partner, scrutinizes the
executive branch and presidential power. Follow them at
therevolvingdoorproject.org [[link removed]]._

On Friday, the Federal Reserve released a thorough report
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documenting how, ahead of the crash of Silicon Valley Bank, its bank
supervisors failed to notice obvious warning signs, and were prevented
by their bosses from acting on what they did spot. As the
[[link removed]]_Prospect
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David Dayen wrote
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the Fed effectively publicized to the world its incompetence and
disinterest in the basic work of regulation.

“As the head of the government agency responsible for supervising
SVB, [Federal Reserve Chair Jerome] Powell bears responsibility for
the oversight failures that precipitated its collapse,” Nobel
Prize-winning economist Joseph Stiglitz wrote at Project Syndicate
last week
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Meanwhile, ProPublica’s three
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reports
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on
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Supreme Court Justice Clarence Thomas’s extravagant gifts from
right-wing billionaire Harlan Crow have inspired other reporting
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on ethics failures from the other Court conservatives, including Chief
Justice John Roberts
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Senate Judiciary Committee Chair Dick Durbin called for Roberts to
testify about the Court’s ethics regime, an invitation that Roberts
point-blank refused, thumbing his nose
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at a co-equal branch of government. The Court destroyed Americans’
right to reproductive autonomy last year under nonsensical
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pretenses, and now has its sights trained on student debt relief under
self-refuting arguments
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The Fed and the Court are the two least democratic, and arguably most
powerful, branches of the federal government today. In both, we see
demonstrations of one of America’s founding principles: Unchecked
power wielded by unelected rulers breeds corruption, and ultimately,
tyranny. The Fed is not there yet, but the Court certainly is. It is
past time for our actually elected leaders, including President Biden,
to say so.

Both the Fed and the Court have demonstrated material sloppiness at
the basic functions of their institutions—the Fed through its
regulatory failings, the Court through its nonsense arguments. Neither
Powell nor Roberts was chosen by the American people. Both have low
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public approval
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To be sure, the depth and style of rot is different between the two
institutions—the Court is now just an arm of the hardest-right parts
of the conservative movement, while the Fed is enthralled to a less
ideologically rigid, but still harmful, pro–ruling class project. In
effect, the Roberts Court and the Powell Fed represent the two major
wings of the Republican Party: reactionary bigotry on one hand,
business libertarianism on the other.

However, the outcomes are similar: Both the Fed’s and the Supreme
Court’s unelected leaders are sabotaging most Americans’ personal
liberties to suit the preferences of their favored few. The Fed’s
interest rate hikes are explicitly intended to destroy the bargaining
power of full employment
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especially for workers of color
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The Supreme Court is systematically stripping away Americans’ rights
and the federal government’s protections.

Both institutions’ leaders have behaved unethically in power. In
2021, the Fed faced
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a slew
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of alleged insider trading scandals
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after which it gestured toward some (opaque) ethics reforms, which the
Consumer Financial Protection Bureau’s inspector general said were
insufficient
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last week. The Court justices, as we now know, have enjoyed opulent
luxury from wealthy ideologues and legal institutions with business
before them. The Fed’s alleged insider traders resigned
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though none have faced a trial or formal investigation, and all are
doing just fine for themselves—Vice Chair Richard Clarida
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is now a regular on CNBC
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The Court conservatives face no immediate prospect of being removed,
and Republican senators raged on their behalf at the thought of it in
a hearing on Tuesday.

The chance for personal financial gain probably isn’t _why_ the Fed
undertook its (generally good) COVID-19 interventions, or _why_ the
Court is pursuing its (extremely bad) radical right-wing agenda. But
causality is beside the point: These unelected, unaccountable leaders
feel entitled to exploit their positions for material gain, while
making life worse for everyone else in the process. Whether they’re
just greedy cynics, or true believers in the virtue of inflicting pain
on their fellow Americans, or (most likely) a bit of both, they
evidently have no concept of honest public service.

These institutions need to change profoundly; not just their
leadership (though that’s a starting point) but the actual powers
they wield. As Dayen writes
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the Fed should be stripped of its bank supervision powers since it
does not take them seriously. (I support giving these duties over to
the Federal Deposit Insurance Corporation.) There’s also talk of
stripping away Fed independence
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altogether. The rot at the Court, though, requires even deeper
changes. The _Prospect_’s Ryan Cooper has argued, I think
persuasively, against the power of judicial review
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the very least, as I argued the day ProPublica dropped its first story
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Thomas must be investigated, tried, and if found guilty, impeached
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These institutions need to change profoundly; not just their
leadership but the actual powers they wield.

Elites who work in and around these institutions often make the same
argument against even considering any of these proposals: that it is
absolutely essential to preserve both the Fed’s and the Court’s
“legitimacy,” in an abstract sense, and any talk of reform
imperils that legitimacy. Even in the face of material sloppiness,
rank corruption, and direct public objection to their actions,
questioning the Fed or the Court could (gasp!) weaken people’s
willingness to accept the outcomes they dictate. To the
institutionalists, that must be avoided at all costs.

It’s infuriating how powerful this argument has proven to the Biden
administration and the mainstream media, since it’s such an obvious
sham. For one, it is willfully ignorant of how power works in
government. The Court and the Fed aren’t Tinkerbell
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if people stop believing in them. Their dictates are backed by the
power of courts to enjoin, to confiscate property, and lock people up,
as well as the most militarized police force in the Western world.

But more importantly, that “legitimacy” argument is exactly
backwards. If it is so essential to maintain faith in the Fed and the
Court, then both institutions must earn that faith from the people.
Trust follows from an institution’s actions, not from silencing
anyone who points out that the actions prove they are untrustworthy.

The Court is inventing absurd reasons to do the bidding of the
conservative ideological movement, whose financial backers then reward
the justices with wealth and vacations. This is not how a legitimate
court works. It’s predetermining the outcomes it wants and then
inventing fictions to justify them, not giving a good-faith,
fact-based hearing to the issues.

The Fed is not as bad, but is on a dangerous path. It is ignoring both
its full-employment mandate and its financial stability obligations,
which are written into the law, by hiking rates while shrugging at
bank supervision. Though it is meant to act in the interest of the
nation as a whole, like the Court, the Fed’s history shows it has
mostly worked at the behest of wealthy capital-owners, even when doing
so was morally and materially wrong.

We are living through a true crisis of legitimacy for the Supreme
Court. It is long overdue. Ideally, leaders at the Fed will see what
is happening and ask some tough, introspective questions about their
own powerful, cloistered institution. But the problems at both of
these institutions are ultimately symptoms of a deeper, systemic
issue: the lack of democracy across our governing bodies, from the
Senate’s filibuster
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and disproportionality
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to state elected officials being literally stripped
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of their ability
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to do the people’s work.

Biden claims frequently that he sees his presidency as a battle to
restore the soul of our nation, and his foreign policy as an effort to
prove that democracy is superior to authoritarianism. He endorsed
reforming the filibuster
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and welcomed
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the “Tennessee Three” to the White House, for which he deserves
praise. (No word on Montana Rep. Zooey Zephyr yet, though, at the same
time that his administration senselessly
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triangulated on trans rights
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But does he think unquestioned deference to a Court making nonsense,
anti-democratic rulings—whose majority was appointed by presidents
who lost the popular vote—advances either of these goals? What about
letting the Fed sabotage his middle-out economic agenda with an
induced recession just before re-election, without so much as a
tongue-lashing?

The question is whether Biden thinks “democracy” means the set of
institutions America has built over the centuries, or if it means the
goal of a self-ruling public those institutions were intended to
achieve. When an institution is abusing its powers to thwart that
goal—when, moreover, its power directly incentivizes its leaders to
do so—the institution must be reformed or abolished. Americans have
done so plenty of times before. But we can only do so when we name our
problems, clearly and courageously, no matter what the profiteers from
those problems think.

The Declaration of Independence holds that governments derive their
“just powers from the consent of the governed.” A government with
no possibility of consent, whether it be an actual monarchy or a de
facto judicial dictatorship, is a tyranny. It is time we remember
that.

* Supreme Court
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* federal reserve
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* democracy
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