The Wall Street Journal has an editorial resisting what it calls "Politicizing the Federal Reserve" after "97 years" during which "the 12 regional banks of the Federal Reserve system have operated relatively free of political interference from Washington." It says that "Fed regional presidents are often the main proponents of tight monetary policy" and warns against a proposal it says will be "one way Congress and the White House can intimidate these regional presidents to go along with the policies they favor."
The editorialists accuse Congress of a "brazen attempt to hijack central bank policy" and complain "The law will make it harder for regulators to do what ought to be their main job, which is making sure that they don't again let a credit mania run out of control. It's one more way in which this much vaunted reform will make the financial system even more politicized, and thus more vulnerable to another panic."
The Journal is usually a font of wisdom, but mark me down as a dissenter on this one. The Constitution vests the power to coin money and to regulate its value with Congress. If Congress wants to exercise that power, it isn't a hijacking or intimidation or interference. If anyone is doing any hijacking here it's the defenders of the Fed, who seem to be forgetting that the system was set up by Congress in the first place. The supposed freedom from political interference of the past 97 years doesn't seem to have prevented panics -- in fact, we've had both the Great Depression and the Great Recession. I'm no great fan of Congress, and if Congress wants to delegate its powers to coin money and regulate its value to a Federal Reserve that it has no power to influence, I suppose it can. But at least voters have the power to punish politicians for hyperinflation or for high joblessness by voting them out of office. With a Fed "free of political interference," where are the checks and balances? Where is the accountability mechanism?