Born out of crisis a century ago, the Federal Reserve has become the most powerful macroeconomic policymaker and financial regulator in the world. In The Myth of Independence, Sarah Binder and Mark Spindel trace the Fed’s transformation from a weak, secretive, and decentralized institution in 1913 to a remarkably transparent central bank a century later. Offering a unique account of Congress’s role in steering this evolution, the authors explore the Fed’s past, present, and future and challenge the myth of its independence.
Binder and Spindel argue that recurring cycles of crisis, blame, and reform propelled lawmakers to create and revamp the powers and governance of the Fed at numerous critical junctures. They pinpoint political and economic dynamics that have shaped interactions between the legislature and the Fed, and that have generated a far stronger central bank than anticipated at its founding. In retaining its unique federal style, the Fed dilutes the ability of lawmakers and the President to completely centralize control of monetary policy. In the ongoing wake of the financial crisis, partisan rivals in Congress seem poised to continue battling over the Fed’s statutory mandates and the powers given to achieve them.