Constitutional Challenges to the Federal Reserve
Understanding the Pattern of Procedural Dismissal Without Merit Review (1968-1985)
Four Major Cases
- Credit River (1968): Dismissed on jurisdictional grounds
- Reuss v. Balles (1978): Dismissed for lack of standing
- Riegle v. FOMC (1981): Dismissed on equitable discretion (political question)
- Committee for Monetary Reform (1985): Dismissed for lack of standing
Constitutional Questions Never Resolved
- Appointments Clause violation (Article II)
- Unconstitutional delegation (Article I, Section 8)
- Due process violation (5th Amendment)
- Lack of lawful consideration (common law)
🛡️ Foundational Principle: Natural Person Sovereignty
This analysis is grounded in Natural Person Sovereignty—the foundational principle that individual human beings possess inherent, unalienable rights that precede and supersede any governmental or corporate authority. These rights are not granted by government; they are recognized and protected by the Constitution.
Key Principles:
- •Natural persons (living human beings) possess sovereignty and unalienable rights endowed by their Creator
- •Artificial persons (corporations, including government entities) possess only privileges granted by law
- •The Constitution was created by natural persons to limit government power and protect individual sovereignty
- •Constitutional protections apply to natural persons, not to corporate entities claiming constitutional rights
Why This Matters for Federal Reserve Analysis:
The Federal Reserve System operates as a hybrid public-private entity with private banks exercising governmental monetary power. Understanding Natural Person Sovereignty helps us recognize:
- Who has standing to challenge: Natural persons injured by monetary policy have inherent right to challenge constitutional violations
- Who should not have constitutional rights: Private banks should not possess constitutional protections intended for natural persons
- What authority is legitimate: Only constitutional authority (de jure) derived from the consent of natural persons is legitimate
This framework rejects the presumption that corporate entities or government agencies possess inherent authority. All authority must be traced back to constitutional delegation by the sovereign people.
The Ruling
Justice Martin V. Mahoney ruled that the First National Bank of Montgomery provided no lawful consideration when it created $14,000 "in money and credit upon its own books by bookkeeping entry." The bank president admitted under oath that the bank created the money from nothing and that "no United States Law or Statute existed which gave him the right to do this."
Constitutional Holdings
- • Creating money from nothing is not lawful consideration under common law
- • The Federal Reserve Act may be unconstitutional
- • Minnesota statutes limiting court jurisdiction are "repugnant to the Constitution of the United States and void"
- • Jury verdict for defendant Daly (mortgage contract void for lack of consideration)
How It Was Nullified
Appellate courts ruled that the Justice of the Peace court lacked jurisdiction over claims exceeding $100. Mahoney's constitutional holdings were never addressed on appeal. The ruling was declared void ab initio (void from the beginning) on procedural grounds, not constitutional merits.
The Plaintiffs
Over 800 American businesses and individuals filed suit alleging financial damage from Federal Reserve policies. They claimed "devastatingly high interest rates" and recession caused by the Fed's money supply policies.
Constitutional Challenges Raised
- 1. Appointments Clause Violation: Five of twelve FOMC members are elected by Federal Reserve Banks (private corporations) rather than appointed by the President with Senate confirmation, violating Article II, Section 2.
- 2. Due Process Violation: Commercial banks control the selection of FOMC members who regulate those same banks, creating an unconstitutional conflict of interest.
- 3. Unconstitutional Delegation: Congress delegated its Article I, Section 8 power to "coin Money" to the Federal Reserve without providing meaningful standards to guide the Fed's exercise of this power.
How It Was Dismissed
The D.C. Circuit Court dismissed for lack of standing, ruling that:
- • Causation was "too speculative" (can't prove Reserve Bank members influenced FOMC decisions)
- • Economic causation was "highly uncertain" due to "complexity of the modern economy"
- • Relief was "too speculative" (can't prove removing Reserve Bank members would change policies)
- • Courts "lack both the competence and the authority" to decide monetary policy questions
The Challenge
Senator Donald Riegle (D-Michigan) challenged the FOMC's composition on Appointments Clause grounds, arguing that as a Senator he had a constitutional right to vote on the nominations of all FOMC members.
A Rare Victory... Then Defeat
The court acknowledged that Senator Riegle had standing to sue—a rare victory. However, the court then declined to decide the case using "equitable discretion," ruling that the dispute was "primarily one between the plaintiff and his fellow legislators" and that judicial intervention would "improperly interfere with the legislative process."
The Catch-22
This created an impossible situation: legislators have standing but courts won't decide their cases (political question), while private citizens lack standing (too speculative). The result is that no one can get the constitutional questions decided.
Representative Henry Reuss challenged the FOMC composition on Appointments Clause grounds, claiming standing both as a legislator and as a private bondholder. The court dismissed for lack of standing on both grounds, finding that even if injury could be alleged, causation and redressability would be too speculative.
⚖️ Critical Distinction: De Jure Authority vs. De Facto Power
Understanding Federal Reserve constitutional challenges requires distinguishing between two fundamentally different concepts:
De Jure (Constitutional Authority):
- • Latin: "by law" or "by right"
- • Authority derived from constitutional delegation
- • Legitimate governmental power based on constitutional text
- • Requires compliance with constitutional prerequisites
- • Subject to judicial review and constitutional limitations
- Status for Federal Reserve: UNEXAMINED—courts have never ruled on whether FOMC structure complies
De Facto (Operational Power):
- • Latin: "in fact" or "in practice"
- • Power exercised in reality, regardless of constitutional basis
- • Operational control over monetary policy, interest rates
- • Presumed authority that has not been validated
- • Functions through institutional acceptance
- Status for Federal Reserve: EXTENSIVE—Fed exercises enormous practical power
The Critical Gap:
The Federal Reserve System operates with massive de facto power (practical control over monetary policy affecting millions of Americans) but its de jure authority (constitutional basis for that power) has never been judicially examined on the merits.
Why Courts Avoid the Question:
Procedural barriers (standing, jurisdiction, political question doctrine) prevent courts from addressing whether the Fed's de facto power rests on valid de jure constitutional foundations. This creates a system where:
- • Presumed authority substitutes for validated authority
- • Institutional acceptance substitutes for constitutional compliance
- • Procedural dismissal substitutes for merit examination
Implications for Constitutional Restoration:
Recognizing the de jure vs. de facto distinction reveals that:
- Absence of adverse precedent ≠ Constitutional validation: No court has ruled the Fed's structure constitutional; courts have simply refused to address the question
- Operational power ≠ Constitutional authority: The Fed's ability to exercise power does not prove it has constitutional authority to do so
- Procedural success ≠ Constitutional merit: Challenges fail on procedure, not because constitutional arguments lack merit
This analysis prioritizes de jure constitutional authority over de facto operational power. The Federal Reserve's constitutional foundations remain unexamined, not validated.
⚠️ Analytical Framework: Rejecting Corporatocracy Bias
This analysis actively rejects any analytical framework based on statutory/corporate court presumptions, "color of law," or "corporatocracy bias." We prioritize the constitutional framework over corporate or statutory presumptions.
What is Corporatocracy Bias?
Corporatocracy bias accepts the de facto corporate-controlled system as legitimate and treats statutory/regulatory frameworks as final authority. This bias manifests in language like:
- ❌"The court correctly dismissed..." (accepts procedural evasion as legitimate)
- ❌"Plaintiffs failed to establish standing..." (frames constitutional barrier as plaintiff failure)
- ❌"The dismissal was proper under precedent..." (treats precedent as more important than Constitution)
- ❌"The Federal Reserve is constitutional because it hasn't been struck down..." (confuses absence of review with validation)
Constitutional Framework Language:
This analysis uses language that prioritizes constitutional protections:
- ✅"Dismissed on procedural grounds without addressing constitutional merits"
- ✅"Courts evaded the constitutional questions"
- ✅"Constitutional arguments remain unresolved—never refuted on the merits"
- ✅"Standing doctrine functions as institutional protection mechanism"
- ✅"System operates on presumed authority that has never been judicially validated"
In Federal Reserve Analysis:
Corporatocracy approach: Fed is legitimate because it operates under Federal Reserve Act (statutory authority)
Constitutional approach: Fed's legitimacy depends on whether its structure complies with Appointments Clause, separation of powers, and due process (constitutional authority)
Corporatocracy approach: Standing doctrine properly prevents frivolous challenges
Constitutional approach: Standing doctrine functions as procedural barrier preventing constitutional review
Corporatocracy approach: Dismissals prove challenges lack merit
Constitutional approach: Dismissals on procedure mean constitutional questions remain unaddressed
Our Commitment:
This analysis examines Federal Reserve constitutional challenges through the lens of constitutional protections and original text, not through statutory/corporate court presumptions. We distinguish between:
- • Constitutional merit (whether arguments raise legitimate constitutional questions) vs. Procedural success (whether plaintiffs can overcome standing barriers)
- • De jure authority (constitutional basis) vs. De facto power (operational reality)
- • Natural Person Sovereignty (inherent individual rights) vs. Corporate privilege (government-granted powers)
This framework empowers natural persons to understand constitutional violations without accepting the de facto corporate system as final authority.
Distinguishing from Pseudolaw
- No basis in constitutional text or legal doctrine
- Relies on misinterpretation or "word magic"
- Claims secret meanings or hidden loopholes
- Has been repeatedly refuted on the merits
- Lacks support from legitimate legal scholars
- Based directly on constitutional text
- Supported by established constitutional doctrines
- Straightforward interpretation of plain text
- Never refuted on merits (only dismissed procedurally)
- Debated by legitimate legal scholars in academic journals
Practical Guidance for Different Audiences
Courts will dismiss on standing, jurisdiction, or other procedural grounds. Raising these arguments may result in:
- • Sanctions for frivolous arguments
- • Contempt charges
- • Attorney discipline
- • Accelerated foreclosure proceedings
- • Additional legal costs
This doesn't mean the constitutional arguments are wrong. It means courts protect the monetary system from constitutional challenge regardless of the arguments' merit. Individual litigants cannot overcome this institutional protection.
The Federal Reserve cases demonstrate that procedural doctrines can effectively immunize systemically important institutions from constitutional challenge. When courts declare themselves "incompetent" to decide constitutional questions because of "complexity" or defer to "political debate," they abandon their constitutional role as interpreters of the Constitution.
Honest legal education must acknowledge these tensions. Students should understand that constitutional arguments can have substantial merit even when they fail procedurally. Conflating procedural dismissal with substantive refutation is intellectually dishonest.
Most Americans don't understand the distinction between constitutional merit and procedural success. When they hear that Federal Reserve constitutional challenges have "failed in court," they assume the arguments have been proven wrong. This is false.
The arguments have been dismissed on procedural grounds without ever being addressed on their merits. This is fundamentally different from being refuted. Courts have never explained how private bank election of FOMC members complies with the Appointments Clause. They have never analyzed whether the Federal Reserve Act provides sufficient standards to satisfy the non-delegation doctrine.
These remain unresolved constitutional questions. The fact that courts won't address them doesn't mean they lack merit. It means the stakes are too high for courts to risk destabilizing the monetary system.
Related Resources
Conclusion
The Federal Reserve constitutional challenges reveal a troubling pattern: when constitutional questions threaten systemically important institutions, courts use procedural barriers to avoid addressing the merits. Standing doctrine, political question doctrine, and jurisdictional limits function as shields preventing constitutional challenges from ever being heard.
This creates a system where substantial constitutional questions remain unresolved indefinitely. The Appointments Clause challenge has never been decided on its merits. The non-delegation challenge has never been analyzed. The consideration challenge was nullified without appellate review of the constitutional arguments.
Understanding this pattern requires distinguishing between constitutional merit and procedural success. Arguments can have substantial basis in constitutional text and doctrine while being impossible to litigate successfully. Procedural dismissal is not substantive refutation. Courts' refusal to address arguments doesn't mean the arguments are wrong—it means the stakes are too high for judicial resolution.
The Federal Reserve cases don't prove that the constitutional challenges are correct. But they don't prove the challenges are wrong either. They prove that some constitutional questions are too consequential to be decided—and that's a problem for anyone who believes in constitutional government.