LEADERSHIP AT THE FED

Scores of books have been written on the Federal Reserve System and its conduct of monetary policy. Few if any, however, have dealt directly with the Fed's status as an independent political power. Kettl (government and foreign relations/Virginia) bridges this gap with an enlightening study that evaluates the central bank's rise to eminence through the achievements of its chairmen. For many years after its 1913 creation, the Fed was viewed ""as a banking utility, not a board framing monetary policy to counteract economic cycles."" Not until passage of the Banking Act of 1935, in fact, did the Fed escape Treasury control and begin operating under the aegis of its own chairman. Kettl singles out three men as definers and shapers of the Fed's responsibilities as well as its relations with the executive and legislative branches. Their ranks include Marriner S. Eccles, an FDR appointee who envisioned an activist role for the institution. Also on the author's list is William McChesney Martin who established the principle of the Fed's nonpartisanship and interdependence with the rest of Washington during his two-decade tenure. Incumbent Paul Volcker earns a hand as well for resolute and innovative credit measures that have curbed inflation. Arthur Burns is damned with faint praise as a stylist rather than leader. In the event, the author analyzes how these stewards and their fellow chairmen have responded to socioeconomic or political crises ranging from the Great Depression through post-Vietnam stagflation. He also probes the Fed's frequently frosty relations with lawmakers and presidents, noting the central bank's real power derives from the capacity of its chairmen to secure consensus support for potentially painful or unpopular courses of action. Among other accomplishments, Kettl manages to clarify and reduce to human terms the complexities of monetary policy-making. Overall, then, a well-wrought and welcome contribution to FRB literature.