Democratic Sovereignty and the Prerogative to Make Money: The Case of the Federal Reserve

The surge of executive power unleashed by the Supreme Court has reached the Federal Reserve, provoking a crisis that the justices seem suddenly anxious to avoid. But the drama is long overdue. The central bank has a constitutional stature that poses a direct challenge to unitary executive theory, the principle animating the Court's recent case law. Congress established the Federal Reserve System to carry out a critical legislative prerogative, making the sovereign money supply. Congress used an institutional form, national banking, innovated precisely to secure sovereign money-making from executive (originally monarchical) interference. Congress in turn assigned a vital responsibility, the capacity to make money out of debt in the people's name, to the Fed. The constitutional conclusion follows: Congress's prerogative over money-making clearly secures the Fed's independence from presidential interference. That conclusion is lost in current scholarship that treats the Fed as fundamentally like other independent agencies. The Court has assumed, similarly, that the unitary executive presides over a relatively homogeneous regulatory field. The case of the Fed exposes the separation of powers as a more complicated project. Legislatures built democratic sovereignty by struggling for prerogatives that, like money-making, protected their lawmaking authority. The prerogatives claimed by Congress inform the work of each agency and official, including within the executive branch. The Court dismantles democratic sovereignty when it denies the reach of those prerogatives.