In the context of Kevin Warsh's confirmation hearing for Fed Chairman, he explains why the Fed was designed as a private banking syndicate, how its notes undercut earlier, higher-quality currencies, and how the promise of an "elastic" money supply turned into endless expansion that props up government deficits and Wall Street at the public's expense.

He opens by reminding listeners that the Federal Reserve is a relatively recent invention, not a permanent fixture of American government, and that it is the third attempt at a central bank — one that should have disqualified itself by its failures:

A lot of people don't know anything about the origin of the Fed. Maybe they think we always had a Federal Reserve, which we did not. The Federal Reserve Act was passed in 1913, so prior to 1913 there was no Federal Reserve. It wasn't that there were no central banks; there actually were. The Federal Reserve is not even the first central bank we had; it's the third and it should have been "three strikes, you're out," because this is the worst of the three and it's also been around the longest, which is the biggest problem.

He stresses that the Fed was established as an entity separate from direct government control — deliberately private — and he uses a small but telling detail about postage to make the point that the Fed legally sits outside the federal government:

Number one, the Federal Reserve was independent. It wasn't part of the government. … And one of the ways you know this– if you get a letter from the Federal Reserve, it's got a stamp on it. If you get a letter from any government agency there are no stamps because they get it franked through the post office. If the government is mailed they don't have to buy a stamp because they own the post office, so they just send it. But the Federal Reserve has to actually buy stamps from the government. Why? Because it's not part of the government. It's a private banking syndicate.

He recounts what the Fed was supposed to do for the banking system: offer a superior, uniform bank note that could be trusted nationwide — but argues the Fed's note wound up being inferior to the privately issued notes that preceded it: