This is the Cato Daily Podcast for Monday, November 30th, 2009.

I'm Caleb Brown.

The Federal Reserve has claimed broad authority in the last two to three years,

buying mortgage-backed securities, loaning to non-bank institutions

and making long-term loans to banks.

They have all dramatically changed the Fed's balance sheet.

Lawrence H White, Professor of Economics at George Mason University and Cato Institute

adjunct scholar, says the Fed has essentially changed from a conservatively invested Treasury

Bill Mutual Fund into a highly leveraged hedge fund full of assets no one wants to buy.

We spoke at the Cato Institute's 27th annual monetary conference held November 19th. It seems almost ridiculous to have to say it out loud

that the rule of law matters when it comes to deciding

how we get our money, doesn't it?

Well, it seems ridiculous to have to say that it should matter.

How much it does matter is unfortunately not enough.

Our monetary system is... unfortunately not enough.

our monetary system is sort of at the discretion at the whim of central bankers these days,

so we don't have the rule of law, we have rule by authorities.

When did that begin?

When did it begin that the Federal Reserve had this broad swath of powers that it has claimed

in these last couple of years? That's a good question.

It begins with the Federal Reserve Act, of course,

but the Federal Reserve Act had a fairly limited mission ascribed to the Fed. The Fed ran the clearinghouse. The Fed checked on the

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