THE POWER AND INDEPENDENCE OF THE FEDERAL RESERVE

An examination of the origins, evolution, structures, and functions of the American government’s most opaque institution.

This country’s argument over the wisdom, indeed the constitutionality, of a central bank is as old as Alexander Hamilton and Thomas Jefferson. Now, after 100 years of the Federal Reserve System, the Hamiltonians have won the debate, but confusion about the Fed’s role and unease with its extraordinary power persists. Indeed, groups as disparate as the tea party and Occupy Wall Street are prepared to abolish it. Conti-Brown (Legal Studies and Business Ethics/Univ. of Pennsylvania; co-editor: When States Go Broke: The Origins, Context, and Solutions for the American States in Fiscal Crisis, 2012) touches only lightly on the Fed’s controversial history and rejects radical reforms such as auditing the Fed or establishing a default monetary policy rule. He argues in favor of simplifying the Fed’s governance, reforming the Board of Governors and the Federal Reserve Banks, and making more of the professional staff subject to presidential appointment. These sensible proposals emerge organically after the author’s focused discussion of the Fed’s many missions and the various internal and external constituencies that shape its policy. Conti-Brown stresses two principal themes: that it’s not enough to look only at the Fed’s legal architecture to understand it properly and that assessing the institution through the lens of its vaunted “independence” is not analytically useful. It’s too much to say that the author humanizes the Fed, but he goes a long way toward demystifying it. A creature of statute, yes, but the Fed is also a product of political compromise shot through with features that can only be understood by knowing history, by understanding how law and personalities relate one to another, and by accepting that in a democracy, politics and ideology are rarely inseparable from any governmental enterprise.

Generalists will appreciate Conti-Brown’s gentle hand-holding, and specialists will argue over his analytical slant that dispenses with a narrow and legalistic view of what the Fed’s all about.