Project 2025's Attack on the Federal Reserve: Free Banking, Gold Standard, and K-Percent Rule
Project 2025, via its 'Mandate for Leadership' chapter 26, proposes dismantling the Federal Reserve's lender-of-last-resort function through a free-banking system, restoring a gold standard, or adopting a K-Percent Rule—each a radical reordering of U.S. monetary policy that would prioritize financial-sector deregulation over worker protections and systemic stability. None of these proposals have been enacted.
The free-banking proposal on page 737 of Project 2025's Mandate for Leadership would abolish the Federal Reserve's core crisis-fighting function—the lender of last resort—and replace it with a system where private banks operate under general business laws with no central backstop. The authors claim this would end 'permanent bailouts' and 'crony regulatory burdens,' but history and economics show that without a lender of last resort, bank runs become catastrophic, as the 1930s demonstrated. This proposal treats workers and small depositors as expendable: when a bank fails under free banking, it is not shareholders or executives who lose everything—it is ordinary people who lose savings, jobs, and access to credit. As of this writing, the administration has not taken any steps to end the Fed's lender-of-last-resort function; it remains a purely aspirational proposal. The gold standard and K-Percent Rule proposals are equally dangerous, if less immediately destabilizing. The gold standard section itself admits the 'disastrous experience of the Western nations on their managed gold standards between World War I and World War II'—yet still recommends a return to gold as a 'self-policing mechanism' to rein in spending. In practice, if gold-backed, the dollar's value would be pegged to a single metal, making it harder for the Fed to respond to recessions, unemployment, or financial crises—exactly the kind of austerity that crushed workers during the Great Depression. The K-Percent Rule is dismissed in the text itself as 'politically malleable' and destabilizing due to financial innovation (p. 738). All three proposals share a common thread: they are designed to shrink the government's capacity to act in the public interest while leaving private financial power untouched.
Original source — excerpted
project2025 Project 2025 ch. 26: Trade (pp 770-771)"— 737 — Federal Reserve by ensuring that cash earns a positive (inflation-adjusted) rate of return, it can pre- vent households and businesses from holding inefficiently small money balances. Further benefits of free banking include dramatic reduction of economic cycles, an end to indirect financing of federal spending, removal of the “lender of last resort” permanent bailout function of central banks, and promotion of currency competition.26 This allows Americans many more ways to protect their savings. Because free banking implies that financial services and banking would be gov - erned by general business laws against, for example, fraud or misrepresentation, crony regulatory burdens that hurt customers would be dramatically eased, and innovation would be encouraged. Potential downsides of free banking stem from its greatest benefit: It has mas- sive political hurdles to clear. Economic theory predicts and economic history confirms that free banking is both stable and productive, but it is radically different from the system we have now. Transitioning to free banking would require polit - ical authorities, including Congress and the President, to coordinate on multiple…"