The central problem in American politics today is not ideology. It's trust.
In 1958, nearly three‑quarters of Americans trusted the federal government to do the right thing most of the time; by 2025, that figure had fallen to just 17%.
Trust matters because it is a form of institutional capital.
Without it, reform becomes politically impossible.
Nowhere is this trust deficit more dangerous than at the Federal Reserve. In July 2025, Federal Reserve Governor Christopher Waller gave speech explaining the growth in the Federal Reserve’s balance sheet:
"In August of 2007 our balance sheet was around $870 billion, equal to approximately 6 percent of nominal gross domestic product (GDP).
"Today it is around $6.7 trillion, with a t, which is about 22% of GDP. This is down significantly from its maximum size of nearly $9 trillion in early 2022 but still quite large.
"Since nominal GDP has essentially doubled since 2007, if our balance sheet had grown at the same rate, it would be around $1.7 trillion today—not $6.7 trillion."
Waller argued that critics who want the Fed's balance sheet back at its 2007 size ignore structural changes in its liabilities: he estimates roughly $2.3 trillion in currency and about $780 billion in the Treasury General Account (TGA).
The Fed has no control over these two major liabilities.
According to Waller, maintaining the current "ample reserves" framework implies around $2.7 trillion in reserve balances, which — combined with currency and Treasury balances—yields a realistic floor of about $5.8 trillion for the balance sheet.
Waller’s point is that further shrinking below this level would require changes in Treasury behavior and fiscal policy, which is not controlled by the Federal Reserve.
In October 2025, Federal Reserve Chairman Jerome Powell reinforced this point in a speech:
"In the longer run, the size of our balance sheet is determined by the public's demand for our liabilities rather than our pandemic-related asset purchases.
"Non-reserve liabilities currently stand about $1.1 trillion higher than just prior to the pandemic, thus requiring that our securities holdings be equally higher."
If balance-sheet size is determined primarily by liabilities the Fed does not control, then independence can only be preserved by governing those liabilities directly.
Demand for physical currency cannot be dictated by the Federal Reserve, but its growth can slow over time as digital payments expand and precautionary hoarding fades.
Congress can restore the Treasury General Account to pre-2020 norms.
Doing so would lower the structural floor of the Fed's balance sheet and help restore the Federal Reserve’s independence.
This expansion of power was understandable during genuine emergencies. There must be a public commitment to shrink the balance sheet steadily during normal economic conditions.
In December 2025, the Federal Reserve’s balance sheet was $6.5 trillion. Most of these assets were Treasury Securities ($4.2 trillion) and mortgage-backed securities ($2.1 trillion).
Although the Fed began reducing its mortgage-backed securities (MBS) holdings when it began quantitative tightening in 2022, there is no guarantee that this shift will remain permanent.
By driving mortgage rates lower, Fed purchases in MBS contributed to the rise in housing prices, especially after 2020.
That dynamic favored leveraged investors and existing owners over first‑time buyers whose incomes could not keep pace.
A housing market distorted by central‑bank intervention and speculative demand creates fertile ground for populist proposals championed by figures like Zohran Mamdani.
Making markets work again is the most effective antidote.
With the national debt approaching $38 trillion, the United States cannot borrow its way to prosperity. Sustainable expansion must come from mobilizing private capital that already exists.
In a functioning credit system, even a modest reduction in excess reserves and a more limited role for the Fed could support many multiples of additional private lending over time, amounting to trillions of dollars in productive economic activity.
Regulatory unpredictability compounds the problem.
This is why the REINS Act deserves renewed attention.
Requiring congressional approval for major regulations with large economic effects would restore trust and predictability to the rulemaking process.
Structural conflicts inside the Federal Reserve further undermine trust.
The Fed acts both as the supervisor of banks and as the institution that sets interest rates and manages crises.
When rates rise, the market value of banks' long‑term assets falls, weakening the very institutions the Fed regulates and forcing it to judge its own prior decisions.
An institution charged with maximizing employment, stabilizing prices, supervising banks, and backstopping markets in emergencies inevitably expands its discretion.
Oversight is further weakened by the fact that the Federal Reserve’s inspector general is appointed within the Fed itself.
In Canada, monetary policy is conducted by the Bank of Canada, while bank supervision is handled by a separate Office of the Superintendent of Financial Institutions.
Peter Wallison of the American Enterprise Institute has pointed to this structure as the reason Canada did not experience major bank failures during the 2008 crisis.
Congress should also restore a modern version of the Glass-Steagall protections. Separating commercial banking and investment banking would reduce systemic risk and limit the Fed's role as a perpetual crisis manager.
If Congress is serious about restoring trust and preserving the Federal Reserve's independence, it must make clear that emergency powers are temporary, exceptional, and reversible.
Robert Zapesochny is a researcher and writer. His work focuses on foreign affairs, national security, and presidential history. He's been published in numerous outlets, including The American Spectator, The Washington Times, and The American Conservative. When he's not writing, Robert works for a medical research company in New York. Read more Robert Zapesochny Insider articles — Click Here Now.
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