Committee for Monetary Reform v. Board of Governors of Federal Reserve System, 84-5067

• Decision Date: 28 June 1985
• Docket Number: No. 84-5067,84-5067
• Citation: 766 F.2d 538
• Parties: , 54 USLW 2026 COMMITTEE FOR MONETARY REFORM With Various Other Plaintiffs, Appellants, v. BOARD OF GOVERNORS OF the FEDERAL RESERVE SYSTEM, et al.
• Court: U.S. Court of Appeals — District of Columbia Circuit

Page 538

766 F.2d 538

247 U.S.App.D.C. 48, 54 USLW 2026

COMMITTEE FOR MONETARY REFORM With Various Other Plaintiffs Appellants, v. BOARD OF GOVERNORS OF the FEDERAL RESERVE SYSTEM, et al.

No. 84-5067.

United States Court of Appeals District of Columbia Circuit.

Argued March 22, 1985.

Decided June 28, 1985.

Appeal from the United States District Court for the District of Columbia (Civil Action No. 83-01730).

Lawrence Velvel, Washington, D.C., for appellants. John E. McDermott, was on brief.

Sandra M. Schraibman, Atty., Dept. of Justice, Washington, D.C., with whom Richard K. Willard, Acting Asst. Atty. Gen. and Anthony J. Steinmeyer, Atty., Dept. of Justice, Washington, D.C., were on brief, for appellees.

Grasty Crews, II, Washington, D.C., was on brief for the Honorable John Melcher, Member, U.S. Senate, amicus curiae, urging affirmance.

Before ROBINSON, Chief Judge, and EDWARDS and GINSBURG, Circuit Judges.

Opinion for the Court filed by Circuit Judge HARRY T. EDWARDS.

HARRY T. EDWARDS, Circuit Judge.

The question presented in this case is whether private businesses and individuals who allegedly have suffered financial damage as a result of the money supply policies of the Federal Reserve System ("System") have standing to raise constitutional challenges to the exercise of power by the System and to the composition of one of its elements, the Federal Open Market Committee ("FOMC" or "Committee"). The District Court held that the appellants lacked standing, and accordingly dismissed the complaint. ¹ We affirm.

I. BACKGROUND

The Federal Reserve System, established in 1913 as the nation's central bank, is composed of both public and private elements. ² In addition to the FOMC, the System includes the Board of Governors, the twelve regional Federal Reserve Banks, the Federal Advisory Council, and the approximately 5,500 privately owned commercial banks that are members of the System. Among the principal functions of the Federal Reserve System is the conduct of monetary policy, the aim of which is to promote national economic goals through influence on the availability and cost of bank reserves, bank credit, and money. The three primary means through which the System implements monetary policy are open market operations, regulation of member bank borrowing from the Federal Reserve Banks, and establishment of member bank reserve requirements.

The most important of these methods, open market trading--i.e., the purchase and sale of Government securities in the domestic market--is exclusively the function of the FOMC. ³ The Committee is composed of twelve members: the seven members of the Board of Governors of the Federal Reserve System, who are appointed by the President with the advice and consent of the Senate, ⁴ and five representatives of the Federal Reserve Banks, who are elected annually by the boards of directors of the Banks from among the Banks' presidents and first vice presidents. ⁵ The Federal Reserve Banks are private corporations whose stock is owned by the member commercial banks within their districts. ⁶ The board of directors of each Reserve Bank consists of six members elected by the member commercial banks and three members appointed by the Board of Governors of the Federal Reserve System. ⁷ The presidents and five vice presidents of the Reserve Banks are selected by the respective boards of directors but are subject to approval, suspension and removal by the Board of Governors. ⁸ In short, the FOMC consists of seven members who hold their offices by virtue of presidential appointments confirmed by the Senate, and five members who are elected by Reserve Bank boards of directors, and who hold their offices subject to the approval of the Board of Governors.

This is the third occasion in recent years on which we have been presented with a challenge to the composition of the FOMC on the ground that the participation of the five Reserve Bank members violates the Appointments Clause of the Constitution. ⁹ In Reuss v. Balles, ¹⁰ we held that a Member of the House of Representatives lacked standing to maintain such an action in his capacity either as a legislator or as a private bondholder. With regard to the latter asserted basis for standing, the court held that the plaintiff had failed to allege specific injury to the value of his financial holdings. The court further stated that, even if the plaintiff could allege a more concrete injury, he would have difficulty establishing that the injury was caused to a sufficient degree by the alleged violation and was likely to be redressed by a favorable decision. ¹¹

Three years later, in Riegle v. FOMC, ¹² the court was again presented with the challenge to the composition of the FOMC. In Riegle, the court held that a United States Senator had standing on the basis of his asserted right under the Appointments Clause to vote on the nominations of all members of the FOMC. ¹³ However, the court exercised its equitable discretion to decline to decide the merits of Senator Riegle's claim on the ground that adjudication would improperly interfere with the legislative process by intervening in a dispute that was essentially one between the plaintiff and his fellow legislators. ¹⁴

The present action was filed in the District Court in June 1983 by the Committee for Monetary Reform, a non-profit corporation, and over 800 other corporations, businesses and individuals who alleged that they were "directly affected by the money supply policies of the Federal Reserve System and in particular have been damaged financially by the devastatingly high interest rates caused by its policies and by the recession which those policies produced." ¹⁵ The complaint charged that, in managing the nation's money supply, the Federal Reserve System had been operating unlawfully in three respects. ¹⁶ First, as in Reuss and Riegle, the plaintiffs claimed that the FOMC exercised significant governmental authority and that all of its members were therefore "Officers of the United States" required to be appointed in the manner prescribed by the Appointments Clause. Second, the complaint charged that the inclusion on the FOMC of members whose selection was ultimately controlled by commercial banks violated due process by delegating authority to individuals directly interested in the operations of the regulatory body. Third, the plaintiffs maintained that four statutes that authorize the Federal Reserve System to control the money supply, 12 U.S.C. Secs. 225a, 263, 357 and 462b, "represent an unconstitutional delegation of the Article I, Section 8 power of Congress 'To coin money [and] regulate the value thereof ...' in that neither they nor any other statutes provide any meaningful criteria to guide the administrative exercise of the power so delegated." ¹⁷

The District Court ruled that the plaintiffs lacked standing and therefore granted the defendants' motion to dismiss. Assuming for purposes of analysis that the plaintiffs had suffered injury in fact, the court held that they had failed to allege facts sufficient to support a finding that their injuries were caused by the alleged constitutional violations or that a favorable decision would be likely to redress their injuries. ¹⁸ This appeal followed.

II. STANDING

"In essence the question of standing is whether the litigant is entitled to have the court decide the merits of the dispute or of particular issues." ¹⁹ In recent years, the Supreme Court has articulated several constitutional requirements that a litigant must satisfy to establish standing:

Art. III requires the party who invokes the court's authority to show that he personally has suffered some actual or threatened injury as a result of the putatively illegal conduct of the defendant, and that the injury fairly can be traced to the challenged action and is likely to be redressed by a favorable decision. ²⁰

In the present case, the appellants advance two theories to support their standing. First, the appellants contend that they have suffered economic harm as a consequence of the alleged constitutional violations. Second, they rely on several cases that have recognized standing under certain circumstances to challenge the authority of agencies on separation of powers grounds. We find both of these theories insufficient to establish standing in this case.

A. Economic Harm Caused by the Violations

The appellants--who include businesses, building associations, farmers, a labor union, and private individuals--allege that they suffered serious financial damage as a result of monetary instability and high interest rates in recent years. ²¹ We may assume that these allegations are sufficient to meet the requirement of injury in fact. We agree with the District Court, however, that the appellants have failed to show that their injuries are fairly traceable to the asserted constitutional violations.

In their complaint, the appellants assert in general terms that monetary instability and high interest rates are "a direct result of the participation of the Federal Reserve Bank representatives ... in the policymaking function of the Federal Open Market Committee" and of the "unconstitutional delegation of legislative power" to the Federal Reserve System. ²² As developed in their declarations and briefs, the appellants' theory of causation apparently runs as follows. Although the Reserve Bank members are a minority on the FOMC, they play a significant role in the FOMC decisionmaking process, which operates by consensus. The participation of members who are unaccountable to democratic control, and who represent the interests of commercial banks, leads to FOMC decisions to reduce or limit the growth of the money supply. The implementation of such decisions, in turn, inevitably leads to higher interest rates, which are driven yet higher by uncertainty over the future value of money caused by the unrestricted delegation of power to the Federal Reserve System. Finally, high...