As the Senate voted to raise the federal debt ceiling to $14.3 trillion and President Obama prepared to deliver his State of the Union address, Federal Reserve Chairman Ben Bernanke was voted into a second term yesterday. Despite Senators on both sides of the aisle pledging to block his reconfirmation, Bernanke won another four years in the position, having been previously appointed by George W. Bush.

The issue of the Fed’s independence has long been contentious among political observers in and out of Washington. Since its creation in 1913, the Fed has controlled the nation’s money supply without oversight from Congress. In 1978 it received a dual mandate from Congress to combat unemployment and inflation.

The Fed’s critics associate Bernanke’s reign with an era of easy money and low interest rates, which fueled speculation in the housing bubble. His supporters, such as the president, claim he was given a tough job and has instituted policies that averted a lengthy depression. At a hearing last year, Bernanke himself sympathized with public outrage over out-of-control spending, expressing his anger at the AIG bailout. But to many he is seen as continuing the legacy of Alan Greenspan, whose confidence prior to the recession forced Greenspan to admit that he had overlooked a “flaw” in our economic system.

Bureaucrats at the Treasury and Federal Reserve defended their unprecedented actions with the “systemic risk” and “too big to fail” arguments, but they failed to recognize what got us here. It is without question that we lived beyond our means and borrowed excessively in past decades, with only the illusion of wealth. Sooner or later, a market correction has to occur, despite propping up toxic assets and reinflating the bubble with easy money. Bernanke’s academic expertise was the Great Depression, so he should know this.

The Austrian School of economics has a theory of the business cycle which explains how artificially low interest rates cause excessive credit and speculative bubbles. The fault that is attributed by this administration to a failure of capitalism or the greedy risk-taking of private banks is more accurately ascribed to the larger force operating behind the scenes, the Federal Reserve. While we should not expect any change in direction from them, fortunately Obama has recently proposed something called the “Volcker rule” which would prohibit commercial banks from owning hedge funds or private-equity firms. This corrects one of the mistakes that led to the economic crisis – the repeal of Glass-Steagall in 1998. Investors hope the Fed will pursue a sound exit strategy from intervention, eventually raising rates and ending the practice of quantitative easing.

But more decisive measures are needed. Last year, Congressman Ron Paul introduced a bill intended to audit the Federal Reserve, which by now has picked up 317 co-sponsors and bipartisan support. In particular, the audit is aimed at finding out what kind of agreements the Fed has with foreign central banks, as much of the Fed’s most crucial actions are shrouded in secrecy. It is true that since the economic crisis, the Fed has expanded their balance sheet to over $2 trillion. Movements like “End the Fed” coincide with the Tea Party protests and increasing anti-government sentiment as a reaction to deficits and spending in Washington.

The bill’s opponents have charged that giving Congress more oversight over the Fed would interfere with the ideal independence of monetary policy from political influence. Supporters responded that, just as the Fed releases the minutes of their meetings months later, that Congress should only be allowed to review decisions in retrospect, and that the proposed audit is not intended to influence or politicize monetary policy.

Many of the founding fathers, including Thomas Jefferson, presciently warned about the dangers of central banks. The Federal Reserve is controversial today for the same reasons that the Second and First Banks of the United States were. Fiat, or paper money, is only money because the government declares it to be, and is not tied to any commodity like silver or gold. We owe that to the breakdown of the Bretton Woods system in 1971.

While the Fed’s creation was intended to prevent bank runs and investor uncertainty, they have given us only assurances that they will continue to print money recklessly. There is a concrete question of moral hazard in the trend of bailouts, a risk of future inflation and rising unemployment, and meanwhile the central bankers seem to have forgotten about fiscal restraint – adopting instead whichever stance is most convenient for their buddies on Wall Street. Until we can know what they are doing with our tax dollars, we should not put any faith into the central bankers’ ability to manage the economy.

Kevin Gallagher is a Collegian columnist. He can be reached at [email protected].