Should the Federal Reserve be independent from the president and Congress or should it not??

Question

The Federal Reserve was established in 1913 and is, therefore, a �creature of Congress.� The President of the United States nominates members of the Board of Governors of the Federal Reserve, subject to confirmation by the Senate. However, the Federal Reserve is basically free to pursue monetary policy independent of Congress or the President. Should the Federal Reserve remain independent of the President and Congress or should the President and Congress control monetary policy? Why?

Answer 1

The federal reserve is a independent banking company under charter from the US government . They are not accountable to any one and have never paid taxes . It should be abolished and the US Treasury take back the duties of controlling the US money supply .

Answer 2

The supreme court is nominated by the president and confirmed by congress, yet their decisions can't be influenced by any member of the executive or legislative branches.  I think it's good the government has some say in who runs the fed, because otherwise they might start representing the interests of corporations more than the nation.  It's also good the sitting president or congress can't tamper with existing actions because they have election concern that weight on their decisions.  After all, it's the economy stupid...

Answer 3

We can actually look to history for some answers.

In regards to central banking, there has always been a general concern about turning the power to create money over to politicians. Which is why it is always kept are arms length.

When the Federal Reserve was originally conceived, power over monetary was significantly different.

The Board was controlled by the White house as the Secretary of the Treasury was the ex-officio chairman of the Board. Another automatic member was the Comptroller of the Currency. But, back then, it was a Board of Directors and had less power. The Branches were relatively autonomous (which acted as a check-and-balance against white house politics). However this autonomy of the branches greatly affected the ability to deal with the Great Depression as the branches did not act in unison toward a common goal.

The Banking Act of 1935 made significant changes including a major step toward independence.

- The Board of Directors became the Board of Governors

- The Branches lost a significant amount of autonomy and took direction from the Board of Governors

- The position of Chairman of the Board of Governors was created

- The Secretary of the Treasury and the Comptroller were no longer on the board.

However, though the Treasury was not represented on the board, the Treasury maintained a fair amount of influence. Following WWII, pressure from the Treasury to keep interest rates low conflicted with inflation monetary targets.

The Treasury Accord of 1951 was the next step toward reducing treasury influence in monetary policy.

Even though it was designed to be independent, the Fed is sensitive to the political winds because the President can appoint who they want, and congress has been known to meddle if they don't like what is happening.

What would happen today if the Treasury/Executive branch had more influence in the Fed? You would see a lot more ideology in monetary policy. There would be a strong temptation to finance wars and tax cuts with excessive money, which could result in dire long-term consequences. Virtually every modern episode of hyperinflation has been caused by ruling parties ordering the central bank to just print money

Read up on Zimbabwe right now and their 150,000% inflation.