Fed independence key, despite Trump advisors’ view

Before we discuss the plans Trump advisors are hatching to jettison the Federal Reserve’s independence, let’s concede that every president covets the Fed’s power to set interest rates.

Donald Trump wouldn’t be the first to try to grab some of that power. His predecessors in making the effort include Harry Truman, Lyndon Johnson and Richard Nixon.

Even those presidents who stood by silent as the central bank did its thing surely winced when it raised interest rates or declined to lower them. High interest rates can lose elections. No president wants them.

Neither do farmers, ranchers and other business borrowers. If taking away the Fed’s independence keeps interest rates low, then, isn’t that a good thing?

Let’s start by acknowledging that the Fed isn’t completely independent. Congress created it in 1913 and what Congress does, Congress can undo. In 1978, Congress changed the Fed’s marching orders, mandating that it pursue maximum employment as well as price stability.

Moreover, elected officials determine who serves on the Federal Reserve Board. Its seven governors are appointed by the president and confirmed by the Senate.

But once confirmed the governors serve 14-year terms, which gives them a considerable degree of independence. They can only be removed for cause – and not because the president or the Congress disagrees with their policy views.

And that’s not the Fed’s only protection from politics. Another is the composition of the Federal Open Market Committee, the arm of the Fed that decides monetary policy. Five presidents of the 12 Federal Reserve banks join the seven governors on the FOMC, and they’re elected by private banks that are members of the Federal Reserve System.

Politicians can and do express their