The Fed’s Independence from President Obama Is Much Exaggerated

Fed Governor Lael Brainard declared yesterday that the Federal Reserve “is designed to ensure that independence from the executive branch is absolutely the focus of the deliberations of the Federal Open Market Committee.” It is clear that her comments were a response to Donald Trump’s criticisms that the Federal Reserve was keeping interest rates artificially low to help the election of the President’s preferred candidate—Hillary Clinton.

One does not have to endorse Trump’s claims fully to believe that the degree of independence touted by Brainard is a serious overstatement. As Peter Conti-Brown has shown, the practical independence of the Fed falls far short of its design.

The seven members of the Federal Reserve Board of Governors are nominated by the President and confirmed by the U.S. Senate.  It is true that the full term of a governor is fourteen years and appointments are staggered so that one term expires in each even-numbered year The lengthy terms and staggered appointments are indeed intended to contribute to the insulation of the Board—and the Federal Reserve System as a whole—from day to day political pressures.

But governors almost never serve anything close to their fourteen year terms. The outside options are simply so lucrative that almost everyone resigns after terms far short of that. As a result, today every Governor of the Federal Reserve was appointed by President Obama. Brainard herself is Obama’s former Undersecretary of the Treasury, not to mention a candidate for Secretary of that department in the Clinton administration.  Would we think a Supreme Court was independent of the President if all its members were appointed by him?

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Don’t Fear the Fed

Federal Reserve Building, Washington DC.

In the mid-1960s, Liberty Fund’s founder, Pierre Goodrich, decided to travel to Montauk, Long Island and rent an apartment overlooking the ocean. He arrived there with his wife and top personal assistant and spent a month reading Ludwig von Mises’ most important work, Human Action (1949). Such was Goodrich’s commitment to understanding the classics of liberty and such were his resources that he went to great lengths to read and contemplate one of the great works of 20th century Austrian economics.

Let’s suppose you are not a multimillionaire businessperson with the time and dedication to live by the ocean and read the great works of Mises and other Austrians. Fear not—John Tamny’s excellent, accessible, and surprisingly provocative Who Needs the Fed? will save you the cost of a beachfront rental on Long Island and give you a nice introduction to one of Mises’ other classic works, The Theory of Money and Credit.

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Fear Not, the Federal Reserve’s Relevance Is Declining by the Day

United States Federal Reserve System symbol.

“The sole use of money is to circulate consumable goods.” – Adam Smith


In a recent op-ed for the Wall Street Journal, Morgan Stanley economist Ruchir Sharma observed that while the world is seemingly “turning inward,” this comes “in a period when countries are more beholden than ever to one institution, the U.S. Federal Reserve.” Interesting about Sharma’s piece is that if anything, it revealed the Fed’s growing irrelevance.

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If We Love the Banks, We Must Love Them Enough to Let Them Fail

Photographer: John Taggart/Bloomberg via Getty Images

Commenting on the health of big U.S. banks last week, former Fed Chairman Ben Bernanke wrote on his Brookings blog that “a lot of progress has been made (and more is in train) toward reducing the risks that large, complex financial institutions pose for the financial system and the economy.” Bernanke’s observation came after Minneapolis Fed president Neel Kashkari’s recent commentary about the need to reduce the alleged problem of “Too Big To Fail” within banking. Some readers could be excused for wondering why Bernanke would have any opinion on the matter at all.

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The Courage to Gamble

Large surface covered with US cash notes

Ben Bernanke’s new book, The Courage to Act, demonstrates throughout its 579 pages the fundamental uncertainty faced by central bankers, Treasury officers, and everybody else when dealing with financial cycles, panics and recoveries.  “But if the last few years had taught us anything, it was that we had to be humble about our ability to detect emerging threats to financial stability,” he writes. 

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The Myth of an Independent Federal Reserve: A Conversation with Peter Conti-Brown

federal reservePeter Conti-Brown of the Wharton School comes to Liberty Law Talk to discuss his most recent book, The Power and Independence of the Federal Reserve.

Congress Works

End of line

Huzzah: last week Congress passed, in bipartisan fashion, a five-year, $300 billion-plus transportation bill.   President Obama is expected to sign the legislation. The bill provides for much-needed infrastructure development. Beyond that it fixes a constitutional infirmity; corrects an institutional oddity that’s been with us since 1913; and even promises better food service on Amtrak. Miracles happen, and not just in Bethlehem. Okay, I take that back. Making ready allowance for the usual sausage-making (which I’m happy to tolerate, within bounds) this enactment is mostly smh stuff. Start with the ostensible constitutional fix: the act makes Amtrak’s President, who is appointed by its…

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Obama’s Wrecking Ball Administration

miley cyrus sulla palla demolitrice

This past Friday, the U.S. Department of Justice filed its expected petition for certiorari in Texas v. United States, involving several states’ challenge to the administration’s “deferred action” program (“DAPA”). DAPA would grant deferred action—and, along with it, work permits and other benefits—to several million immigrants who are unlawfully present in the United States. The Fifth Circuit Court of Appeals affirmed a preliminary injunction against DAPA on November 9; DoJ’s petition to review that preliminary ruling on an expedited schedule arrived within a fortnight. Why the haste, my child? Well, on an expedited schedule this case could still be heard and…

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The Central Bank of Switzerland Announces a Huge Loss: Would the Fed Ever Be This Honest?


The Swiss National Bank (SNB) has just announced an eye-popping net loss for the first quarter of 2015: 30 billion Swiss francs, or $32 billion[1]. A participant in its recent shareholders meeting shortly before the announcement told me “the directors looked very stressed.”

How does a money-printing central bank lose money?

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Should the Federal Reserve Be Free of Supervision While It Carries Out Vast Monetary Experiments?


The “Audit the Fed” proposal of Senator Rand Paul (R-Ky.) elicits a surprising amount of emotion, from opponents and supporters alike. Why should this be?

“Monetary policy” purposefully sounds technical and dull—you like it that way if you want to keep it the domain of supposedly objective experts who don’t want any mere politicians interfering in their elite central banking club. But money affects everybody and is an emotional topic, especially if the Fed is on purpose crushing you, as it currently is doing to savers, in order to benefit borrowers and speculators.

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