The Fed has amassed enormous—in practice, unaccountable—power, and taken roles natural to government and to the private sector. It’s the central bank, paramount financial-system regulator, and . It shouldn’t, however, undertake activities better and naturally performed in the private sphere.
The latest example: On its own prerogative, the Fed announced Aug. 5 it was introducing “FedNow,” a real-time interbank payments system, expanding its role in processing that the private sector is well-equipped to handle. Critically, Congress didn’t instruct it to do so. Moreover, the Fed’s entry will deter private-sector competition.
With its Faster Payments Task Force, which met from 2015 to 2017 and comprised 400-plus largely private-sector members, the Fed believed it saw a U.S. banking industry behind other countries in faster payments. So it socialized the idea the central bank can and should ride to the rescue. Its 92-page justification for FedNow touted the FPTF’s request that the Fed provide faster payments. But the FPTF didn’t have the authority to instruct the Fed to act. The Fed is a creature of Congress, not a free agent. If Congress wanted it to take payments operating role, it could so legislate.