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

Gary Richardson and David W. Wilcox

Journal of Economic Perspectives, 2025, vol. 39, issue 3, 221-38

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.

JEL-codes: D72 E52 E58 G28 N12 N22 N42 (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1257/jep.20251447

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