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How Congress Designed the Federal Reserve to Be Independent of Presidential Control

Author

Listed:
  • Gary Richardson
  • David W. Wilcox

Abstract

Conventional wisdom traces the origins of the Federal Reserve's independence to the 1951 Treasury-Fed Accord. That rendition of history is inaccurate. The principal source of the Fed's monetary-policy independence is the Banking Act of 1935, which created the Fed's modern leadership structure and placed monetary-policy decisions beyond Presidential control. Congressional intent is clear in this case because the initial draft of the bill vested control of monetary policy with the President. After extensive debate, Congress amended the legislation and crafted the institutional features that enshrine the Fed's independence. The central role of the Banking Act of 1935 suggests that only an act of Congress or a Supreme Court ruling could fundamentally strengthen presidential influence over monetary policy.

Suggested Citation

  • Gary Richardson & David W. Wilcox, 2025. "How Congress Designed the Federal Reserve to Be Independent of Presidential Control," Journal of Economic Perspectives, American Economic Association, vol. 39(3), pages 221-238, Summer.
    • Handle: RePEc:aea:jecper:v:39:y:2025:i:3:p:221-38
    DOI: 10.1257/jep.20251447
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    More about this item

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • N12 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - U.S.; Canada: 1913-
    • N22 - Economic History - - Financial Markets and Institutions - - - U.S.; Canada: 1913-
    • N42 - Economic History - - Government, War, Law, International Relations, and Regulation - - - U.S.; Canada: 1913-

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