Hands off the Fed!

Investment Analysis Clubs Macro Economic Trends and Risks
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All METARs are aware that President Trump is trying to force the Federal Reserve to reduce the fed funds rate.

I have read many articles about this but the authors of this one caught my eye.

https://www.wsj.com/opinion/trump-lisa-cook-and-the-federal-reserves-independence-657623a9?mod=opinion_lead_pos6

The central bank differs from other agencies in that the power to coin money belongs to Congress.

By Phil Gramm and Jeb Hensarling, The Wall Street Journal, 9/4/2025

The Constitution gives Congress the power to coin money and regulate its value. Congress, in fulfilling that delegated responsibility, created the Federal Reserve. In carrying out narrowly defined monetary policy, the Fed isn’t subject to executive authority….

Despite the Fed’s failings, we continue to support its independence in conducting monetary policy and oppose the president’s attacks on it….

Presidential control of monetary policy would be a threat to financial stability and American prosperity…. [end quote]

Mr. Gramm, a former chairman of the Senate Banking Committee, is a nonresident senior fellow at the American Enterprise Institute. Mr. Hensarling, a former chairman of the House Financial Services Committee, is an economics fellow at the Cato Institute.

Asking whether these eminence grises are conservative is like asking whether the Pope is Catholic. It just doesn’t get any more conservative than this!

To me, this is signed, sealed and delivered. Pundits from the left, center, right and just plain financial atheists (so to speak) want the Federal Reserve to be independent. The New York Times and The Wall Street Journal want the FOMC to make independent decisions and predict market instability if the President is allowed to manipulate the Fed.

Even if that wasn’t true (and I think it is) the consensus will become a self-fulfilling prophecy if President Trump indeed packs the FOMC with his stooges.

Wendy

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Get a load of this guy! He wants to keep his job at the WH if he’s confirmed to the Fed.

Kinda seems like one of these stooges you’re talking about. Speaking of the stooges…

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So in total, @eldemonio , did the Stooges spend $60 or $20?

I think we know the answer to that.

Funny thing the US budget does that in reverse of the FED. The crazy argument is against fiscal policy and for monetary policy.

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I heard an interesting commentary about the Fed. The US Constitution authorised three independent branches, legislative (Congress), executive (Presidency), and judicial (Courts of law). The Fed seems to be a fourth independent branches not authorized by the Constitution but enacted by Congress through the Federal Reserve Act of 1913. The author’s conclusion is that the Fed is part of the executive branch.

The Captain

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That is interesting commentary. Did you read it in Project 2025? Those guys are full of interesting commentary.

As I’m sure you know, the modern Fed and its independence were established in the Banking Act of 1935. The Great Depression exposed some serious weaknesses that needed to be addressed…namely, instability, uncertainty, and inconsistency in the banking industry. Making the Fed explicitly independent from political pressure was one of the solutions Congress came up with.

It’s probably not a big deal nowadays, after all, we have a stable genius calling the shots. But what if we didn’t?

Geesh, I’m growing tired of people wanting to learn old and totally predictable lessons.

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No, I didn’t know that. Not being an American citizen I don’t have much interest in American legislation. What is really interesting for me is the founding document which is the model for many Latin American countries in one way or another. In the old European model the congress is both, executive and legislative, making it much more volatile. The checks and balances are missing.

The comment about the Fed being part of the executive branch was by a Utube commenter I appreciate. Indeed the comment is not just interesting but timely. Maybe SCOTUS will elucidate.

The Captain

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I’ll come out and say it. The author is a moron. Or more likely, deliberately lying.

The Constitution puts the power to coin and regulate money in the hands of Congress, not the President. The Federal Reserve act of 1913 delegated that power to a Federal Reserve Bank. Its independence is a creation of Congress. It is not a separate branch of government.

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Oh, my bad. I wasn’t trying to be snarky. As I mentioned, the Federal Reserve Act didn’t prevent serious issues that became apparent during the Great Depression. Those were addressed in the 1935 Act.

Our modern Fed is largely a result of the 1935 Act. If the commentator is only referring to the 1913 Act, that’s probably why they’ve come to a clearly incorrect conclusion.

Maybe they will, maybe they won’t. It’s a crap shoot. SCOTUS is supposed to be free from political pressure as well. That’s not the world we live in anymore.

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He did not elucidate. He said that the Fed acted as a fourth branch of government and the Constitution only allowed three.

Being about money and Congress having the purse strings, it might be part of legislative. If the Fed is not justice or legislative then it must be executive.

The Captain

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Wait, you are not American citizen but you are commenting with youtube propaganda about how the banking system works? I tried to ignore the whole constitution/independent branch thing, but that was WAY WAY off base.
I worked at the Fed for twenty years. There is an entire regulatory system set up and in place to ensure banking works correctly and that there are no more collapses of the banking system by bank runs or bankruptcies.

There are tons of other non governmental agencies that are under their own management. They Fed doesn’t make ANY political or gov’t decisions. Trying to tie them back into some form of political process makes no sense.

I would also point out that the central bank system has worked so well that most other major countries have copied the system to provide overall stability. They all come to America to meet with our Fed’s and learn and study. I have met/seen them visiting the offices I worked in.

The fact that a multi-bankruptcy business man is trying to meddle in work that requires VERY HIGHTLY educated and trained personnel is scary and laughable. Looking how he has treated NOAA, Smithsonian, FEMA, etc shows the blueprint.

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No. Commenting on whether the Fed is part of the executive branch, if not to which branch does it belong? Are you afraid of the question?

The Captain

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LOL. It doesn’t belong to ANY of them. It literally doesn’t do any spending on behalf of the country, so not congress, and it doesn’t command the army so not executive, and it doesn’t enforce/create laws so not judiciary or congressional.

It is LITERALLY an organization that has two duties - “functions to promote the effective operation of the U.S. economy and, more generally, to serve the public interest”

If you are so fluent in the constitution, find the section where anything the Fed does overlaps with powers given to any of the three branches. It doesn’t.

As for your trolling about am I afraid, that is PURE internet trolling and misdirection. These comments are not helping the conversation at all, and the fact that so many people in America have fallen for this kind of discourse is why we are even here in the first place.

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Exactly but your Constitution only allows three branches.

Afraid of free speech? Just look at how Britain is dealing with free speech.

The Captain

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HAHAHA…so you just wanna strawman and red herring now? That comment above has nothing to do with the Fed, that is literally only applicable to the three branches. This again is trolling, and you are doing well. This is wasting my time, but no you did not win because none of your posts have connected any dots to actually make a conclusion.

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Welp, he should elucidate. Otherwise, he should be cast aside to join all the others making false claims without explanation or evidence.

Back in the day, our government recognized the need to create agencies to help administer laws. Some of these agencies were created to be independent because expertise and long-term decision making were considered critical to the country’s prosperity. There are numerous independent agencies that were created to specifically prevent interference and short-term political shenanigans. Some examples include the Fed, EPA, SEC, FCC, and NLRB…oops, scratch that last one off the list.

While they don’t fit neatly into any of the three branches, they still follow the rules established by the separation of powers. Congress is granted the authority to create and fund these agencies. The President is granted the authority to appoint leadership, with the advice and consent of the Senate. The Courts have the ability to review their actions.

Explaining all of this is tedious and has nothing to do with why the US government is floundering. Our current state of affairs has nothing to do with the type of government we have. The cluster we find ourselves in is a direct result of the quality and character of those in our government. The Constitution can’t fix that.

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In a way, it acts similarly to all of them. Set up by Congress to be deliberately independent of the executive, but whose governors are appointed by the executive; it makes quasi-judicial decisions in its rate settings, which are made by the governors as a collective as you would in an appeals or supreme’s review, the arguments coming from the members themselves reading the employment and inflation data.

The very independence of the agency, which has worked pretty well since the great depression is the primary worry, though, whether or not it is part of the executive, legislative, or judicial branch.

Pete

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I’m happy to hear you are happy!

The Captain

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Voters can.

The Captain

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The constitution says exactly NOTHING about “three branches”, although it directly prescribes Congress, Chief Executive, and Judicial in its first three articles.

The idea of three “governances” is quasi-religious because the brilliant Montesquieu, deeply impressed by John Locke’s briefer description in his Second Treatise of Government described what he saw as useful and necessary to each in his The Spirit of Law - Wikipedia , and at the time of the founding of the USAian Republic these works were held in extremely high esteem. Nevertheless, the founders had a lively sense of real practice over useful abstraction, and left (according to the law defining SCOTUS throughout its history of explaing defining the constitution) plenty of room for actions and decisions shared between the mutually cooperating and checking agencies of the three governances.

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I suppose you’re right. That probably explains all the hubabaloo about who can vote, how they can vote, and how to distribute their votes.

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