Sen Sarbanes on Fed Independence

On February 22nd I wrote about Roger Ferguson resigning as Fed Vice Chairman and I concluded by saying

The Fed is supposed to be independent from political control, and even though the Fed is a cartel run by the banks, for the banks, it does smack of “banana republic” to have all governors appointed by one man, President Bush. I wish Bush hadn’t said, “The Constitution…it is just a God damned piece of paper!”

I had occasion to go back to the Hearing Regarding Ben Bernanke’s Nomination to Be Chairman of the Board of Goverrnors of the Federal ReserveSen Sarbanes had this to say about the Federal Reserve.

SARBANES: Yes.The Federal Reserve Act of 1913, which established the Federal Reserve System, set the 14-year terms for the members of the Board of Governors of the Federal Reserve.

SARBANES: I think that clearly reflected the intention of Congress at the time in enacting this legislation to place the Federal Reserve Board and its individual members beyond the reach of any given administration and the political pressures of the moment.

Actually, the 14-year term is the longest we give to any official in the government other than the lifetime appointments for members of the federal judiciary.

I think it’s fair to say, or certainly has come to be the case, that the credibility of the Federal Reserve rests in large part on broad confidence in its independence in the judgments it makes.

And, obviously, if that confidence were to be undermined, the stature of the board would be gravely diminished. And that, in turn, would have serious consequences, I think, not only for our national economy but, indeed, for the world economy.

Sarbanes Federal Reserve economy

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